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Stefan Leiderer et al. A particular focus of this study is on education and health to account for the central role these sectors play in the MPRSP and with regard to poverty reduction in general. Furthermore, in Malawi and many other countries, education and health routinely feature prominently in the PRSP and represent pilot sectors for decentralisation reforms or new approaches in development cooperation. The findings of this study are predominantly based on qualitative data collected during a three month field trip to Malawi. The case of Malawi Most studies conducted on PFM in Malawi to date refer to the situation under the Muluzi administration. Their findings are rather similar: the budget itself is considered a “shadow budget”, the budget process is judged to be either extremely weak or even a mere “theatre that masks the real distribution and spending”. Usually, political patronage and interference from the top level are blamed for creating informal practices that undermine formal institutions of the budget process. The deliberateness of these political interferences is generally not doubted by the cited studies. However, when the Muluzi administration was replaced in 2004, the IMF and other donors, were quick to hail the new administration as a great hope for Malawi, following a new policy approach and being serious about fiscal austerity and the fight against corruption. This enthusiasm was in part driven by the new president’s decision to appoint a former director of the Africa department at the IMF his Minister of Finance. However, from the beginning many observers considered it problematic that the apparently strong commitment to better and more transparent political leadership depended on very few prominent figures at the top. It was, therefore, of particular interest to assess the impact of apparently improved political commitment to sound PFM at the top in Malawi on the quality of PFM on the ground. Malawi is a unitary state with strong centralistic features. However, in recent years the state, has begun to devolve functions and responsibilities to local levels of government. This new approach is not least due to donors, who felt that a fresh impetus was needed and hence strongly argued for the need to develop a national a decentralisation strategy. Thus, when in 1995 a new constitution was adopted it entailed the requirement to establish local gov- 4 German Development Institute
Public Financial Management for PRSP Implementation in Malawi ernment authorities. In 1998 the National Decentralisation Policy (NDP) was approved, which includes establishing political decentralisation through democratically elected local assemblies and the devolution of central government functions to local government level. The theory and practice of public financial management in Malawi Since the mid-nineties, the formal legal and institutional framework for public financial management in Malawi has undergone a series of reforms. New legislation regulating finance, audit and procurement was written, providing for relatively clear cut responsibilities and time schedules of the budget process in Malawi. Accordingly, recent studies on Malawi’s PFM system conclude that the legal and institutional framework for PFM in Malawi is relatively well designed and in principle provides a good starting point for a sound management of public finances for example. One could, therefore, expect that in principle the formal legal and institutional PFM framework in Malawi should provide for effective fiscal and expenditure planning, budget preparation, execution, and control in line with the priorities set in the Malawi Poverty Reduction Strategy Paper (MPRSP). At the same time, however, the budget process in Malawi is judged by most assessments as extremely weak. This is due to the fact that formal institutions and procedures bear little relevance for PFM practice in Malawi. In fact, instead of being guided by the relatively sound formal legal and institutional framework, the actual PFM process is characterised by three main features: Ad hoc mode of planning and budgeting: Malawi’s PFM is not characterised by routine standard bureaucratic procedures but rather by an ad hoc mode of action throughout the PFM process. Informal practices: Apart from deliberate manipulation of processes for personal gain, informal practices are often used as pragmatic solutions to cope with unexpected problems. Uncertainty: Malawi’s PFM system is characterised by systematic uncertainty, in particular with regard to (i) the availability of financial resources, (ii) the validity of formal rules, (iii) roles and responsibilities, (iv) future political developments, and (v) the progress of reforms. These features are pervasive throughout Malawi’s PFM system and the budget process in particular. Most actors involved in the process contribute to this out- German Development Institute 5
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Page 10 and 11: 4 The Case of Malawi 44 4.1 Why Mal
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Publications of the German Developm
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Discussion Paper 16/2007 Schirm, St
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