World Bank flags savings in budget

Revitalizing Malawi’s Economy: Tackling SOE Governance Challenges to Drive Fiscal Stability and Growth

Post was last updated: December 25, 2025

Key Business Points

  • Weak governance and political interference in State-owned enterprises (SOEs) are undermining Malawi’s public finances, warns the World Bank, highlighting the need for reforms to improve transparency and accountability.
  • The financial footprint of SOEs has expanded significantly over the past five years, with total assets rising to 26% of GDP and liabilities climbing to 20% of GDP, posing significant fiscal risks to the country.
  • Professional and technically competent leadership, insulated from political interference, is crucial to turning around underperforming SOEs and improving their financial performance, according to experts.

The World Bank has raised concerns over Malawi’s fiscal outlook, citing weak governance, political interference, and hidden liabilities within State-owned enterprises (SOEs) as major risks to public finances. The Malawi Public Finance Review 2025 reveals that SOEs have become a significant channel for accumulating fiscal risks, crowding out development spending and complicating stabilization efforts. The review shows that the financial footprint of SOEs has expanded over the past five years, with total assets rising from 14% of GDP in 2019 to 26% in 2024, while liabilities climbed from 9% to 20% of GDP over the same period.

Despite this expansion, returns have remained modest, with losses concentrated in the energy, water, and agriculture sectors, where tariffs are often set below cost-recovery levels and operational inefficiencies persist. In 2024, aggregate SOEs swung from a profit position to a net loss, driven largely by utilities. Zikomo za mitengo, or the cost of doing business, is a significant concern for many entrepreneurs in Malawi, and the underperformance of SOEs only adds to these costs.

World Bank country manager Firas Raad noted that the growing SOEs balance sheet masks underlying weaknesses, representing real fiscal risks that ultimately fall on taxpayers. He cited inter-SOE arrears as a major concern, with the Blantyre Water Board owing the Electricity Supply Corporation of Malawi over K9 billion by the end of the 2023/24 fiscal year. Kusintha kwa mitengo, or tariff adjustments, are necessary to ensure that SOEs operate on a cost-recovery basis and do not rely on bailouts and guarantees.

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 emphasized that SOEs play a vital role in service delivery and economic development, but weak governance has turned many into fiscal liabilities. She 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.

The 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% 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 to ensure that tsogolo la biashara, or the future of business, is secure.

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Vanessa Banda
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