Protests Erupt in Malawi Over Inflation, Economic Woes

Malawi Lowers Economic Growth Forecast Amid Protests Over Inflation

March 1, 2025

Malawi’s government has revised its 2025 economic growth forecast, reflecting growing concerns over inflationary pressures and public discontent. Protests erupted in major cities, including Lilongwe and Blantyre, as citizens voiced their frustrations over escalating prices. The demonstrations, largely led by street vendors, accuse the government of failing to tackle double-digit inflation, which they argue is threatening their livelihoods.

Protesters are particularly agitated about the soaring costs of goods and services, which they blame on the government's inability to control inflation. Alongside the vendors, jobless youths have joined the rallies, expressing dissatisfaction with the administration of President Lazarus Chakwera.

Finance Minister Simplex Chithyola Banda addressed these challenges in the government’s revised annual budget. He disclosed that the growth forecast for Malawi’s economy has been reduced to 3.2% for 2025, a decrease from the earlier forecast of 4.0%. This adjustment follows a turbulent year where growth in 2024 was estimated at only 1.8%, significantly hindered by a devastating regional drought that impacted agricultural output, a key sector in the country’s economy.

Inflation continues to wreak havoc, with a year-on-year rate of 28.5% in January 2025. The surge is attributed to severe foreign exchange shortages that have disrupted imports of essential goods such as fuel and fertilizers. These shortages have fueled the growth of a black market for foreign currency, exacerbating the economic strain on households and businesses alike.

In his budget speech, Minister Banda outlined the government’s strategy to address the foreign exchange crisis. The government aims to boost production in key sectors such as agriculture, tourism, and mining, which are expected to generate foreign currency. Additionally, a national anti-crime unit will be established to combat the illegal foreign currency trade.

The government is also grappling with a high public debt, which stood at approximately 86% of GDP as of September 2024. Banda revealed that debt-restructuring negotiations are ongoing with commercial creditors, following agreements with official bilateral creditors. The successful completion of these talks, he stated, will ease pressure on foreign reserves and provide fiscal space for investments in vital sectors.

Despite these efforts, the country faces an estimated budget deficit of 9.6% of GDP in the current fiscal year, with the next year’s deficit forecasted to remain at 9.5%.