Malawi’s government has reduced its 2025 economic growth forecast from 4.0% to 3.2% amid rising inflation that has triggered protests from street vendors. The inflation rate has reached 28.5%, resulting from foreign currency shortages impacting essential imports. Efforts to address these issues include enhancing agricultural output and establishing a national unit to combat currency-related crime. With public debt at 86% of GDP, negotiations for restructuring are underway.
In response to increasing inflation and public discontent, Malawi’s government has revised its economic growth forecast for 2025, now projecting a 3.2 percent growth down from 4.0 percent. This announcement coincides with widespread protests led primarily by street vendors in urban areas such as Lilongwe and Blantyre, who are struggling to cope with the soaring prices. The demonstrations reflect broader dissatisfaction among unemployed youths towards President Lazarus Chakwera’s administration.
Finance Minister Simplex Chithyola Banda indicated that the nation’s economic growth in 2024 was only 1.8 percent, significantly impacted by a severe regional drought affecting agricultural productivity, a critical sector for the economy. The current inflation rate has escalated to 28.5 percent, fueled by foreign exchange shortages which have hindered imports of essential commodities like fuel and fertilizer, exacerbating the financial strain on citizens.
To combat these economic challenges, Mr. Banda announced plans to strengthen production in vital sectors such as agriculture, tourism, and mining, aiming to enhance the foreign exchange situation. Additionally, the government intends to establish a national anti-crime unit to address the thriving black market for foreign currency. The financial landscape also includes a budget deficit projected at 9.6 percent of GDP for the current fiscal year and 9.5 percent for the next.
Public debt remains a pressing issue, estimated at approximately 86 percent of GDP as of September 2024, with ongoing negotiations for debt restructuring involving both official bilateral creditors and commercial lenders. Mr. Banda stated, “Government in principle has reached agreements with all official bilateral creditors and is still negotiating with commercial creditors to restructure debt,” highlighting efforts to alleviate pressure on foreign exchange and secure fiscal space for investment.
The Malawi government has lowered its growth forecast amid intensifying inflation and public outcry, predominantly from street vendors. The revised forecast is a crucial response to the challenges posed by economic conditions, including high inflation and public debt. Initiatives outlined by Finance Minister Banda aim to bolster economic sectors and address currency shortages, while ongoing debt negotiations could play a significant role in stabilizing the economy.
Original Source: www.thecitizen.co.tz
