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

Public Financial Management for PRSP Implementation in Malawi
7.2.1 How formal PFM rules are undermined
To be effective, the formal institutional and legal framework for PFM needs
to be adhered to in actual PFM practice. Particularly in the context of a very
poor country with few professionals, a high degree of donor dependency and
a long history of political authoritarianism it is obvious that this is a very
challenging task. During the field, research five key areas were identified that
are critical for implementing this framework. 47 The major problems in each of
these key areas were identified and respective reasons for as well as effects of
these problems analysed. Problems in each of these five key areas contribute
to the PFM process in Malawi being characterised by uncertainty, an ad hoc
mode of planning and budgeting and the use of informal practices through
two different channels:
— The direct link where certain problems become explicit triggers 48 for an
increased ad hoc mode of planning and/or budgeting and thereby increase
overall uncertainty.
— A more indirect way that does promote but in itself does not cause ad
hoc behaviour, informal practices and uncertainty;
One example for a typical trigger event would be the delay of disbursement
of funds or detailed announcements by donors. This delay will be transmitted
throughout the entire budgeting process from each stage to the next one.
Reliable budget ceilings will be issued too late and the resulting time pressure
will make it impossible to adhere to formal rules and procedures (e.g. there is
no time to get the budget approved by the full district assembly at the local
level), leading to ad hoc planning and/or budgeting at the various levels. This
again increases uncertainty with regard to the relevance of formal rules and
procedures, even more so when informal practices that are not in line with
formal regulations are not sanctioned accordingly. If ad hoc planning and
budgeting or informal practices are already taking place, the weaknesses in
these areas tend to reinforce those negative features further, increasing the
overall level of uncertainty in the system. Figure 10 illustrates this self-
47 The authors do not claim to cover all relevant key areas for PFM in Malawi. However,
there are reasons to believe that these are probably the most important ones.
48 A “trigger event“ is directly linked to an ad hoc mode of action although it might not
always be easy to clearly identify the single most important event as several factor do often
work together, leading to a situation where ad hoc planning and/or budgeting is practiced.
German Development Institute 131