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

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