Ecama warns on debt write-offs

The Economics Association of Malawi (Ecama) has warned that repeated debt cancellations between State-Owned Enterprises (SoEs) could weaken fiscal transparency, increase contingent liabilities and undermine investor confidence in the power sector. Ecama president Bertha Bangara Chikadza’s warning follows concerns raised by Electricity Generation Company (Egenco) chief executive officer (CEO) William Liabunya on Friday when he appeared before the Parliamentary Committee on Commissions, Statutory Corporation and State Enterprises in Lilongwe. He warned that government’s decision to write off K97 billion which Electricity Supply Corporation of Malawi (Escom) owed Egenco is eroding its capacity to finance new generation projects and rehabilitate ageing infrastructure.

Liabunya said the write-offs, including roughly K30 billion in 2019 and K67 billion in 2024, effectively reset Egenco’s balance sheet despite the company generating revenue from electricity sales. In an interview on Sunday, Bangara-Chikadza said such interventions amount to implicit subsidies that eventually become central government liabilities. “While the cancellation does not involve an immediate cash outlay, it weakens fiscal transparency, understates the true cost of public service delivery and increases contingent liabilities,” she said.

Bangara-Chikadza warned that over time, repeated write-offs could worsen the public debt position and heighten inflationary pressures if losses are financed through domestic borrowing. Beyond fiscal risks, experts say the practice could distort pricing signals across the electricity supply chain. In a separate interview, former Escom CEO Kandi Padambo said the justification for cancellation depends on how the debt accumulated.

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He said: “If it arose through an arm’s-length willing seller, willing buyer transaction, writing off such debts may not be reasonable and may be damaging to both Egenco and Escom. “However, if it resulted from a mismatch between the output price per unit and the price at which Escom sells electricity to consumers, there may be justification for such intervention.” Padambo said attracting private investment into electricity generation requires cost-reflective tariffs, credible and independent regulation. In an earlier interview, corporate governance expert Jimmy Lipunga said sustainability depends on whether Escom’s arrears relate to electricity supplied on commercial terms. He said: “If the debt is in respect of electricity supplied by Egenco to Escom, then the latter has an obligation to pay.

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