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Stefan Leiderer et al. Box 16: Illustrations for PFM under uncertainty This box presents several examples of how formal rules have been undermined and uncertainty created in Malawi’s PFM system. It is a selection of cases based on the field research conducted in Malawi and is intended to illustrate the more abstract considerations above. Delays of ceilings for budgeting This is one of the most prominent examples for how uncertainty (with regard to financial resources) is created in Malawi. The formal schedule for budgeting in Malawi gives clear deadlines for when ceilings have to be communicated and budgets handed in and approved. However, this schedule is frequently not being adhered to. A frequent “trigger event” is that donors are late with communicating their commitments for the following financial year to the government. Therefore, the MoF is late with announcing the ceilings. In order not to delay the entire budgeting process too much, the ministry asks all other government bodies to submit the budget as quickly as possible. This high time pressure induces an ad hoc mode of budgeting. It frustrates those who have already prepared a budget and now have to reduce or redo it again. Comments like the following made by staff of government bodies that suffer from these delays were frequent: “Sometimes you wonder why you make budgets! If in the end, you only get a fraction of what you planned and budgeted. You can’t plan.” (Government body at central government level) “If we start budget planning we should have an idea of how much money we have. But it is unclear how much donors put in. Normally this information does not come. Some do give it - there we can plan. The government knows numbers too late. So, they also send the ceilings very late. Too late, let me tell you - that frustrates us and the operational. … The budget planning process is frustrating and unrealistic.” (Ministry of Health) “No, we normally get the ceilings late. If you do not get the ceilings on time, it is difficult to know the limitations of the budget. We do a budget without knowing the exact figures and then, finally, we have to cut them back.” (Government officer at local government level) “In Uganda they get ceilings nine months in advance. In Malawi, we get them only when the budgeting is finished. We blindly do our budgets.” (District Health Officer) “Budgeting is useless.” (District Health Officer) 134 German Development Institute
Public Financial Management for PRSP Implementation in Malawi Actors use a number of strategies to deal with this problem. Some of them are formal while others are informal but all are pragmatic solutions to this uncertainty in budgeting due to the delays. The first example is a formal and very official solution. The introduction of activity-based budgeting (ABB) even at local government level is one of the most recent reforms in PFM in Malawi. A government official at central level stated that ABB is a good instrument for dealing with delays of ceilings or uncertainty in the budget process as it makes it much easier to cut back certain activities according to the prioritisation when the actual ceilings are finally given. This is much more complicated with line-item-based budgeting. Another more informal solution is that ministries advise their respective budgeting units to take the previous budget as reference for budgeting: “We give the districts a rule of thumb: 10 % more than the last year, the treasury supports that idea. The problem is it makes the planning a bit theoretical and not flexible.” (Ministry of Health). In the health sector an informal solution has become institutionalised: while anticipating that ceilings might come too late and that the proposed health budgets coming from the districts might have to be cut back, the Ministry of Health advises the DHOs to prepare two budgets, budget A and budget B: one of them is the ‘normal’ budget while the other one is a worst case scenario. Both are then submitted to the ministry and based on the ceilings it is then decided which one will be used – over the last years the worst-case plan has been used more often. Another strategy to deal with the delays of ceilings and high time pressure at local government level is to skip certain legally required steps in the budget process. Normally, after the District Secretariat has prepared the budget, the full District Assembly has to approve it. If the ceilings come too late and the NLGFC (which has also received the ceilings late) requests districts to submit budgets within a few days, this step is often skipped. To call for a full assembly meeting in a rural district would require much more time and is very expensive for the District Secretariat. As a pragmatic compromise, the District Budget and Finance Committee are called to approve the budget. The full assembly is then informed about that in the next meeting. There is the danger that this informal solution becomes institutionalised and that formal regulations that require the full assembly to approve the budget are routinely neglected. In some districts, the full assembly had been circumvented for two years in a row when the field research was conducted. All these procedures create significant uncertainty in the budgeting process. However, most government officials at all levels know that this delay is a chain reaction and do not blame the authority above them. A local government official puts it as German Development Institute 135
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Studies Deutsches Institut für Ent
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Preface The present study on ‘Pub
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4 The Case of Malawi 44 4.1 Why Mal
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