Malawi Lowers Growth Forecast Amid Inflation-Induced Protests

Malawi has lowered its 2025 growth forecast to 3.2% amid protests over rising inflation. Demonstrators, primarily street vendors and unemployed youth, criticize the government’s failure to manage economic challenges, which include severe foreign exchange shortages. The government plans to restructure debt and improve production in critical sectors to stabilize the economy.

Malawi’s government has adjusted its growth forecast for the year, stating that the economy is expected to increase by only 3.2% in 2025, down from an earlier estimate of 4.0%. This decision comes amid widespread protests in major cities where citizens, particularly street vendors and unemployed youth, are expressing dissatisfaction with the government’s handling of rising inflation, now at 28.5% year on year. Protestors have accused President Lazarus Chakwera’s administration of inaction regarding the soaring prices affecting their livelihoods.

The rising inflation is attributed to severe foreign exchange shortages, which have restricted imports of essential goods such as fuel and fertilizer. This has facilitated the emergence of a flourishing black market for foreign currency. In response, Finance Minister Simplex Chithyola Banda announced plans to enhance production in sectors like agriculture, tourism, and mining to alleviate these shortages and bolster the economy.

Banda also addressed the significant budget deficits projected at 9.6% of GDP for the current fiscal year and slightly reducing to 9.5% in the next fiscal year. Public debt is estimated at approximately 86% of GDP, and the government is working to finalize debt-restructuring negotiations with both bilateral and commercial creditors to ease pressure on foreign exchange resources.

Banda remarked on the progress made, stating, “Government in principle has reached agreements with all official bilateral creditors and is still negotiating with commercial creditors to restructure debt.” He emphasized that concluding these discussions would create fiscal space necessary for productive investment in the country.

In summary, the Malawian government has revised its economic growth expectations for 2025 downward amid rising inflation that has ignited public protests. With inflation at a staggering 28.5%, the government faces pressure to enhance foreign exchange availability and address public grievances. Efforts to restructure national debt are ongoing, with hopes to stabilize the economy and promote investment in vital sectors.

Original Source: www.straitstimes.com