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Stefan Leiderer et al.
reinforcing cycle. It also illustrates how decentralisation may reinforce
the described process by adding complexity to the entire PFM system and
exacerbating weaknesses in the five key areas.
Over the long-run, there is even the danger that formal rules and procedures
are no longer being taken serious as relevant guidelines of PFM if they are
regularly not being adhered to. Informal practices that serve as pragmatic
“emergency” solutions might become institutionalised as the standard mode
of action. Once this has occurred, it may prove extremely difficult to change
the established routines. The illustrations in Box 16 show the role systemic
uncertainty plays in Malawi’s PFM system and suggest that such a process is
indeed observable in Malawi.
However, high levels of uncertainty might also have other negative effects on
the effectiveness of the PFM system: it could reduce the commitment of actors
at all government levels to these formal rules and procedures. It can also
undermine the legitimacy of newly established institutions, particularly at
local government level, such as the DA. Furthermore, these practices can
undermine capacity development of local councillors as well as effective
coordination between central and local level institutions. Throughout the
PFM process uncertainty is an outcome as well as a cause of an ad hoc mode
of planning and budgeting and the use of informal practices.
132 German Development Institute