Malawi’s government has lowered the economic growth forecast for 2025 to 3.2% due to widespread protests over high inflation and rising costs affecting citizens, especially street vendors. With inflation soaring at 28.5% and a significant fiscal deficit, the government is working to stabilize the economy through production initiatives and debt restructuring negotiations.
Malawi’s government has revised its economic growth forecast for 2025, lowering it to 3.2% from the previously anticipated 4.0% as citizens express dissatisfaction over soaring prices. Protests led largely by street vendors and jobless youths have sparked in major cities like Lilongwe and Blantyre, fueled by rampant inflation exceeding 28.5% in January. These demonstrators accuse the government of failing to mitigate the effects of double-digit inflation on their livelihoods.
Finance Minister Simplex Chithyola Banda noted in his budget address that the country’s economy, heavily reliant on foreign assistance, is undergoing severe strain from inflation and a crippling foreign exchange crisis that has inhibited the import of critical goods, including fuel and fertilizer. The adverse effects of a significant regional drought last year also contributed to a modest growth rate of 1.8%.
Amid these challenges, Banda emphasized the government’s commitment to resolving foreign exchange shortages by enhancing production in agriculture, tourism, and mining, which are sectors anticipated to generate vital foreign currency. The impending establishment of a national anti-crime unit aims to combat the burgeoning black market for foreign currency.
The fiscal deficit for the current budget year is projected at 9.6% of GDP, with a slight improvement expected next year at 9.5% of GDP. Public debt, reported at 86% of GDP in September 2024, remains a priority as the government works toward concluding negotiations for debt restructuring with both bilateral and commercial creditors, which is expected to alleviate pressure on foreign exchange reserves.
“Government in principle has reached agreements with all official bilateral creditors and is still negotiating with commercial creditors to restructure debt,” stated Banda. He anticipates that finalizing these negotiations will create space necessary for productive investment in the nation.
In summary, Malawi’s reduced economic growth forecast for 2025 reflects severe inflation and civil unrest stemming from rising living costs. As protests escalate, the government is striving to implement measures to stabilize the economy and enhance production in critical sectors. The outcome of ongoing debt restructuring negotiations is anticipated to provide fiscal relief and support for future investments.
Original Source: www.straitstimes.com
