Malawi’s fiscal outlook has come under scrutiny after the World Bank warned that weak governance, political interference and hidden liabilities within State-owned enterprises (SOEs) are undermining public finances.
Findings from an analytical chapter that focuses on SOEs in the Malawi Public Finance Review 2025 show that SOEs have become a major channel through which fiscal risks are accumulating, crowding out development spending and complicating stabilisation efforts.
The review shows that the financial footprint of SOEs has expanded over the past five years, with total SOE assets rising from 14 percent of gross domestic production(GDP) in 2019 to about 26 percent in 2024 while liabilities climbed from nine percent to 20 percent of GDP over the same period.
Despite this expansion, returns have remained modest while losses are concentrated in the energy, water and agriculture sectors where tariffs are often set below cost-recovery and operational inefficiencies persist.
In 2024, aggregate SOEs swung from a profit position the previous year to a net loss driven largely by utilities.
In a statement, World Bank country manager Firas Raad said the growing SOEs balance sheet masks underlying weaknesses.
“These are not just accounting issues. They represent real fiscal risks that ultimately fall on taxpayers,” he said.
Raad cited inter-SOE arrears as a major concern, noting that Blantyre Water Board owed Electricity Supply Corporation of Malawi more than K9 billion by the end of 2023/24 fiscal year, undermining liquidity across the sector even where entities appear operationally viable.
For regulated utilities, political resistance to cost-reflective tariffs has compounded the problem, forcing SOEs to rely on bailouts, guarantees and deferred payments, effectively shifting losses off-budget.
The review highlights limited financial transparency, long delays in audited financial statements and the accumulation of arrears as key governance failures that conceal true fiscal exposure.
Economics Association of Malawi president Bertha Bangara-Chikadza said SOEs play a vital role in service delivery and economic development, but weak governance has turned many into fiscal liabilities.
“Underperforming SOEs strain public finances through subsidies, guarantees, unpaid loans and equity injections. If reforms stall, they will continue to worsen Malawi’s debt problem,” she said.
Bangara-Chikadza, economics lecturer at University of Malawi, identified weak boards, poor risk management and lack of transparency as the most damaging failures, calling for professional, technically competent leadership insulated from political interference.
In the review, Lilongwe Water Board (LWB) is cited as a rare example of improvement, with profitability driven by tariff adjustments and operational reforms.
In 2023/24, LWB posted a K9.8 billion profit after-tax, a 27 percent jump from the previous year.
The World Bank noted that LWB’s progress demonstrates that reform is possible when governance improves.
Governance expert Mavuto Bamusi warned that punishing performance undermines incentives, stressing that appointments to SOEs must be depoliticised.
