By Kingsley Jassi:
It has emerged that the Treasury is tracking some State-owned Enterprises (SOEs) that are evading the new policy that mandates them to transfer bank accounts to the Reserve Bank of Malawi (RBM).
A presentation made at the signing of SOEs shareholders’ letters of expectation indicated that an assessment on progress of policy implementation found resistance as one of the major challenges.
However, Finance Minister Simplex Chithyola Banda has warned that failure to comply with the directive would come with consequences, in line with public finance laws.
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Under the 2022 Public Finance Management Act, all parastatals, 77 in total as at now, are required to transfer their bank accounts from commercial banks to RBM.
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The move, that has seen 70 percent of parastatals applying for bank accounts with RBM and 22 who already opened in the first phase of the exercise, has brought some hiccups that include liquidity challenges, loss of financial investment earnings and non-disclosure of some bank accounts.
To address some of the emerging challenges, the government has set up a SOE Fund through which the SOEs will keep their excess liquidity as investment while those struggling with liquidity will be accessing it as short-term loans.
Under this arrangement, the SOEs will be allowed to keep a month’s worth of liquidity in their operational accounts and the excess will automatically be transferred into the fund and be converted into investment.
Chithyola Banda has since warned the underperforming SOEs that they need to pull up their socks to relieve the government from the fiscal burden.
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“My ministry will soon start following up through the framework we have signed to ensure they improve performance and comply with the budget and their performance indicators,” Chithyola said.
He expressed concern that while some SOEs were improving, some of them were still a risk to budget implementation with continued bailouts.
According to Secretary to the Treasury Betchani Tchereni, the underperforming parastatals have been asked, in writing, to explain performance failures before actions are taken.
He also said his office would no longer approve expenditures that do not reflect performance of parastatals, bemoaning the tendency of demanding luxury entitlements without financial or service performance to show.
Meanwhile, the financial performance assessment report for the SOEs shows that there is a mixed outturn but with an improving trajectory.
