Despite government paying private sector arrears through zero coupon promissory notes, the arrears continue to rise and have jumped to K206 billion, according to the Malawi Confederation of Chambers of Commerce and Industry (MCCCI).
Speaking on the sidelines of MCCCI’s 124th Annual General Meeting in Blantyre on Wednesday, immediate past president Karl Chokotho said although payments have been made, the levels of arrears are alarming.
“Payments have been done but we are still at the level where we are not supposed to be at. There are still concerns from pharmaceuticals, seed companies and property owners that they have not been paid yet.
“We really need to get these issues resolved once and for all,” he said.
Government arrears to the private sector have since remained a huge concern to local businesses for some time.
Treasury first announced its decision to pay arrears which were at K155 billion as of June 30 2014 through issuance of zero coupons promissory notes in the 2015/16 fiscal year.
In his 2017/18 National Budget Statement, Finance, Economic Planning and Development Minister Goodall Gondwe said the country had reached a critical economic point when its main preoccupation will be to manage its resources carefully.
In view of the accumulation of domestic debt and arrears of K155 billion as at June 2014, he said budgetary support the country has received must all go into the repayment of debt and the settlement of arrears.
The International Monetary Fund (IMF) recently said Treasury’s continued accumulation of private sector arrears puts the government at a weak fiscal position, thereby threatening its ability to service debt.
In its March 2018 Policy Paper on macroeconomic developments and prospects in low-income developing countries, IMF said this situation is contributing to the rising stress levels responsible for deteriorating loan quality and tighter funding conditions.
“Financial sector stress need not result in a financial sector crisis, but flags the need for intensified regulatory attention and [potentially] intervention to manage stresses and maintain financial stability,” reads the IMF in the statement in part.
Chokotho has since handed over the mantle to Prince Kapondamgaga, who is chief executive officer of Farmers Union of Malawi (FUM).