Public Financial Management for PRSP - Deutsches Institut für ...

Public Financial Management for PRSP Implementation in Malawi
the simple reason that staff supervising the collection of market fees lack
means of transport to access market places.
Box 14:
Revenue Generation in Urban Districts
With regard to revenue generation, cities and municipalities are in a clearly better
position than towns and rural districts. There are two main reasons for this:
First, Malawi’s three cities, its municipality, and even its towns, benefit from better
infrastructure and conditions than rural districts, facilitating most kinds of economic
activities.. Consequently, companies and market places, such as Malawi’s largest
market, located in Zomba municipality, are more often found in urban areas than in
villages of rural districts. This also brings more diverse and wealthier segments of
population to the cities, increasing the potential for tax revenues. Thus, cities benefit
from a much broader tax basis than rural districts.
Second, most property in cities is rated and registered, enabling the administration
to collect significant amounts of revenue from property taxes. In Lilongwe City,
property rates alone make up 85 percent of its total income, including other tax
income and GRF transfers from central government. Even in small towns such as
Dedza Town, and Mangochi Town, property rates account for 58 percent and 34
percent of total income respectively.
Therefore, urban districts are far less dependent on external sources of money. For
example, in the case of Lilongwe City payments from GRF account for only 0.8
percent of the city’s total income. No direct conclusion can be drawn as to whether
cities manage their development planning and public finances better than rural
districts. Nevertheless, the city assemblies are much more independent in PFM
issues than their rural counterparts. In consequence, planning procedures are less
likely to be undermined by parallel planning procedures of external funding mechanisms.
In addition, delays in central government resource allocations and transfers
do not harm planning and budget execution to the same extent they affect rural
districts. This contributes to to more certainty and own responsibility of PFM procedures.
Note: Urban districts refers to Malawi’s three major cities (Lilongwe; Blantyre;
Mzuzu); one municipality (Zomba); and eight towns (Balaka; Dedza;
Karonga; Kasungu; Liwonde; Luchenza; Mangochi; Salima).
German Development Institute 105