Malawi is one of the poorest countries in the world, with a GDP per capita of less than $1 per day. It loses about 30% of its budget to corruption each year. Domestic resource mobilization through tax reform is key to funding development plans and reducing poverty, but tax revenue is only 15.9% of GDP due to widespread tax evasion and lack of accountability. With assistance from multilateral development banks to improve governance, financial management, and mobilize domestic resources through broadening the tax base, Malawi could see increases in tax revenue and more effective use of funds to develop infrastructure, education, health and achieve its national development goals.

1. S
Domestic Resource
Mobilization to Reduce
Poverty in Malawi
By Wisdom Nakanga

2. Country Profile
S Malawi is a small land locked country in southern Africa
S It is the 4th poorest country in the world
S A population of 17 million people
S 1 million orphans
S Average person earns less than $1 a day
S 70% employed in the informal sector and don’t pay most
taxes
S 85% live as subsistence farmers

3. Country Profile
S By any account, Malawi is one of the most impoverished
countries in the world.
S This is despite the fact that there has never been any civil
unrest or war in the entire modern history of the country
S The country is often called “the warm heart of Africa”
because of the peaceful nature of the county’s citizens
S Average life expectancy is 58

4. Obstacles to Unlocking
Financial Opportunities

5. Corruption in Malawi
S According to some estimates, Malawi loses 30% of its budget through
corruption.
S In 2013 Malawi was hit by financial mismanagement scandal dubbed
cash gate in which about K13 billion of public money was swindled by
government officials and their accomplices.
S This led most donor countries (from whom Malawi received 40% of
its annual budget) suspending direct budgetary aid
S This led to a crisis as the entire national budget is financed by
domestic tax revenues.

6. Corruption in Malawi
S Corruption Perception Index by Transparency International (TI)
have shown that out of 176 countries that were assessed, Malawi
112 in 2016 with a score of 31 points out of 100

7. Recent years have seen a decline in the control of corruption
in Malawi

8. Domestic Resource
Mobilization
S Domestic Resource Mobilization is largest resource to fund
national development plans.
S There is need for major tax reform in order to broaden the
tax base and increase tax collection through
S Improved taxpayer outreach
S Auditing
S Criminal investigations

9. Tax revenue (% of GDP)
S As of 2015 the Tax to GDP ratio was a meager 15.9%

10. S The rampant corruption by public officials results in little
incentives by the people to register and pay taxes as it is
their belief that the funds will just end up in someone else’s
pockets instead of for the benefit of the nation.
S Furthermore because most people don’t pay taxes, they are
not compelled to hold the politicians accountable for
mishandling national resources.

11. My plan is to enable the MDBs to help in the development of
Malawi
S MDBs guidance and technical assistance on:
S tax, public expenditure efficiency,
S financial integrity and debt management
S Public resource mobilization and expenditure.
S With improvements in corruption and increase in finance
through mobilizing the domestic resources, the country
would be well on its way to reducing poverty

12. Pathway to development
• improved governance, accountability
• provide efficient financial management,
• improve public-expenditure efficiency
• mobilize domestic resources
• improved education develop infrastructure, energy, health
• implement national development policy plan reflected SDGs

14. END