Malawi’s Treasury has suspended funding for government contracts signed between September 2023 and September 2025, in a sweeping review of public spending that could expose billions of kwacha in potential liabilities.
The directive, issued by Secretary to the Treasury Cliff Chiunda, orders a comprehensive audit of all public contracts, guarantees, consents and employment-related agreements signed over the two-year period.
Until the review is completed, ministries, departments and agencies (MDAs) will not receive funding for works and services linked to the affected contracts, marking one of the most significant fiscal control measures in recent years.
In a memo dated May 29, Chiunda instructed all controlling officers to submit detailed records of contracts, including original values, subsequent amendments, justifications for cost increases and evidence of compliance with procurement procedures.
“Funding will not be provided for the works and services related to these contracts until the review process is completed,” the directive stated.
The National Audit Office and the Office of the Attorney General have been tasked with examining the agreements, with MDAs required to submit documentation by June 20.
The review is expected to assess whether public funds were committed appropriately and whether some contracts may have created hidden or inflated financial obligations for the State.
The decision reflects growing concern within government over rising fiscal pressures and the accumulation of public liabilities, at a time when Malawi is already grappling with elevated debt levels and constrained budgetary space.
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Public finance experts say such reviews are critical to identifying risks that are often embedded in procurement contracts, including guarantees, cost escalations and clauses that may later translate into binding obligations on the State.
Dalitso Kubalasa, a public finance management expert, said many fiscal shocks in Malawi have historically originated from poorly scrutinised agreements.
“Most of the fiscal shocks Malawi faces usually stem from a contract quietly signed with a guarantee or consent clause,” he said.
“When these agreements are reviewed properly, we are not just checking for legal mistakes. We are protecting public resources meant for hospitals, roads and schools.”
Economists have also warned that weak oversight of procurement processes can result in inflated contract values, legal disputes and long-term financial burdens on government finances.
Velli Nyirongo, a Malawian economist based in Scotland, said similar reviews in other countries have uncovered costly commitments that were not fully understood at the time of signing.
“In many countries, poorly negotiated contracts and weak oversight have resulted in significant financial losses and unexpected obligations,” he said.
The Treasury move comes amid broader efforts by authorities to tighten public financial management and restore fiscal discipline following years of rising expenditure pressures.
Corporate governance analyst Jimmy Lipunga said the exercise could help government better understand contingent liabilities that are not always reflected in headline debt figures.
He noted that under public finance rules, Treasury is responsible for monitoring both direct debt and potential obligations arising from guarantees and contracts.
The review also follows a separate nationwide payroll audit targeting public sector employment records, launched amid concerns over a sharp increase in the government wage bill in recent years.
That wage bill reportedly rose from K479.6 billion in the 2021/22 fiscal year to a projected K1.6 trillion in 2025/26, placing additional strain on government finances.
Legal experts have cautioned that while government has the authority to review contracts, any suspension, termination or alteration must follow due legal process to avoid exposing the State to litigation.
Private lawyer Benedicto Kondowe warned that failure to adhere to procurement and contract law could result in costly compensation claims.
“The key consideration is that any decision must follow due process and be supported by evidence to avoid exposing the State to legal liability,” he said.
Despite the legal risks, analysts say the Treasury directive signals a stronger push toward accountability and fiscal transparency.
For many observers, the suspension of payments represents a broader attempt to uncover potential irregularities in public contracting and prevent future budget shocks.
The outcome of the review will determine whether Malawi uncovers systemic weaknesses in its procurement system or confirms that recent contracts were properly executed under existing rules.
Either way, the exercise is expected to place renewed scrutiny on billions of kwacha in public commitments that have largely remained outside public view.
