The Malawi Congress Party (MCP) has launched a fierce attack on the government’s 8.598 trillion-kwacha mid-year budget review, branding it “catastrophic” and “retrogressive,” and warning that it will immediately worsen the cost of living and cripple an already fragile economy.

Responding in Parliament on Monday, MCP Spokesperson on Finance Eisenhower Mkaka accused the government of abandoning its promises of economic recovery and instead introducing measures that will “dampen consumer spending, constrain business activity, and slow economic growth.”

The Lilongwe Mpenu legislator pointed to a series of tax measures, including a mobile-money levy, a cement import surcharge, higher insurance fees, and an increase in Value Added Tax (VAT) from 16.5% to 17.5%, which he said would fuel inflation, weaken the kwacha, and restrict credit access for farmers and businesses.

“The ultimate result is that individuals will suffer, households will choke, businesses will fail to produce, and the economy will be brought to its knees,” Mkaka warned.

He described the VAT hike as a “direct attack on the cost of living,” arguing that the increase contradicts the government’s own assessment of weak production and low economic activity.

A ‘Tax on the Movement of Money’

Mkaka also condemned the introduction of new transaction levies on digital financial services, saying they risk reversing gains in financial inclusion.

“This is a tax on the movement of money itself. We are punishing the villager receiving support, the small business owner going cashless, and the unbanked entering the formal economy. It will drive people back to keeping cash under their mattresses.”

He further criticized the taxation of small gambling winnings, describing it as targeting desperate young people who turn to betting due to widespread unemployment.

“Taxing K2,000 or K5,000 winnings show a government desperate to strip pennies from the pockets of the destitute.”

Leader of Opposition Simplex Chithyola Banda echoed MCP’s concerns, warning that the revised budget is detached from the economic hardship ordinary Malawians face and will intensify the cost-of-living crisis.

Austerity Versus Welfare: The Policy Divide
However, Parliament’s Budget and Finance Committee took a sharply different stance.

Chairperson Sosten Gwengwe urged the government to embrace full austerity, warning against attempts to mix extensive welfare spending with fiscal restraint.

Gwengwe said Malawi must prioritize disciplined spending and realistic revenue measures if it hopes to stabilize the economy.

“Revenue growth is easier when the economy is expanding, but cutting unnecessary spending and embracing austerity is critical right now,” he said.

Gwengwe criticized what he termed a contradictory “middle path”, promising free education, free medicine, free fertilizer and fuel subsidies while simultaneously preaching austerity. He stressed that Malawi’s fiscal space is severely limited.

“With 94% of government financing coming from debt, about 2 trillion Kwacha of the 8 trillion kwacha budget goes to interest payments, benefiting banks rather than citizens.”

However, leader of the House Japie Mhango defends the mid-year budget, describing it as a necessary “fiscal reset” intended to restore discipline after years of economic shocks.

He said tough decisions were unavoidable if Malawi is to regain economic stability.

Parliament is expected to continue debating the mid-year budget review throughout the week, with deliberations scheduled to conclude on Friday.