Ministry of Finance and Economic Affairs has conceded that central government arrears to State-owned enterprises (SOEs)continue to be a significant burden on their balance sheets.
Data contained in the March 2025 Consolidated Report for SoEs in Malawi shows that in 2024, SOEs tax arrears stood at K96.16 billion while government arrears to SOEs increased to K41.2 billion in 2024 from K36.9 billion in 2023.
The ministry said the main cause of the discrepancy between tax payments and the real accumulation of arrears was liquidity issues brought by substantial trade receivables from both public and private debtors.
Reads the report in part: “Tax arrears typically result in a vicious cycle of payment arrears, especially when the SOEs are owed money from other government institutions, such as the outstanding public debt to the water and power utility companies.
“They also pose a significant fiscal risk to the Malawi Revenue Authority [MRA] in terms of meeting revenue collection targets.”
This is happening at a time the aggregate loss for profit making SoEs has worsened to approximately K47 billion in 2024 from K16.8 billion ithe previous year.
Nevertheless, actual remittances remained below the statutory requirement at K20.5 billion in 2024 from K10.2 billion in 2023 while the dividend pay-out ratio moved from 15 percent in 2023 to 22 percent in 2024, according to the report.
But, despite the increase in the pay-out ratio, the actual dividend paid still remained below the statutory requirement.
Comptroller of Statutory Corporations Peter Simbani said in an interview on Tuesday that when the resources are not available to the entities, its operations and further growth are affected.
He said while SoEs have been looking up to government for bailouts, which is not sustainable in the long-run, government has many other priorities requiring resources.
Said Simbani: “On the other hand, if it is government owing the SOEs, it will find ways of settling these arrears as it has done on several occasions before using promissory notes.
“Where it is intra-arrears within the SOE sector, I think It is important that the respective SOEs should come up with turn-around strategies that will transform them from being loss-making to profit-making entities that will enable them to start settling their liabilities.”
Economic statistician Alick Nyasulu said in an interview on Tuesday that the situation is a reflection of government debt that is increasing at an alarming rate.
“Fiscal discipline is our biggest challenge and we need to ask serious questions as to whether we need all these SOEs.
“We have abolished some SOEs or merged some, but in the last 15 years we have been creating various SOEs that remain costly to run,” he said.
Scotland-based Malawian economist Velli Nyirongo observed that the situation is undermining SOEs operational efficiency, service delivery and capacity to contribute meaningfully to the national economy.
“These challenges also present substantial fiscal risks to the government and threaten broader economic stability. Addressing these issues requires a comprehensive and coordinated reform agenda,” he said.
Minister of Finance and Economic Affairs Simplex Chithyola Banda earlier urged parastatals to explore and implement activities that have the potential to grow their revenue base, saying it was the expectation of government that SOEs should go beyond delivery of quality service to Malawians to remit dividends to Account Number One.
The Malawi Government developed the Dividend and Surplus Policy for statutory corporations in 2019, requiring commercially-oriented SOEs to strive to be efficient and effective as they are required to operate on a private sector model to ensure their long-term financial sustainability.
