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Stefan Leiderer et al. and systematic integration of PFM work into international development cooperation was only recently recognised with the PRSP approach and new modes of aid delivery increasingly gaining importance. There is no universal definition of the term Public Financial Management. In this study, PFM is used to denote the different stages of the budget process as well as the design of the legal and institutional framework for PFM and for the management of human and technical capacity that determine the effectiveness and efficiency of processes on each of these stages. The stages are strategic and budget planning, budget formulation, budget execution as well as budget control and evaluation (Leiderer 2004, 7). The primary research focus of this study is on the PFM system because it links and ideally integrates the two prominent approaches to poverty reduction, PRSP and decentralisation. The public budget is the central tool for operationalising and implementing policies based on national strategic plans. However, if a country pursues a strategy of decentralisation, it means either that a new level of government is created or the existing sub-national government levels gain power, responsibilities and resources. This fundamental reorganisation of the state has strong implications for the national PFM system. It also has to be reorganised in a way that provides for effective coordination or integration of planning, budgeting and implementation processes across the various levels. To implement just one these approaches, either PRSP or decentralisation, already is a very complex and long-term process. Nevertheless, particularly in sub-Saharan Africa, many countries are currently in the process of implementing both reforms. For both reform approaches to be successful, a parallel reform of the PFM system is thus crucial. So far, most research has focussed either on PRSP and PFM or – less frequently – on decentralisation and PFM. This study tries to examine the existing and missing links, the contradictions, and the space for synergy between the implementation of PRSP and decentralisation in PFM. Therefore, the main research question of this case study is the following: 18 German Development Institute
Public Financial Management for PRSP Implementation in Malawi What are the major challenges in Public Financial Management (PFM) at the central and local government level for implementing the Malawi Poverty Reduction Strategy (MPRS), particularly in the education and health sector? Special attention is given to the following PFM coordination processes: - Between central and local government level in general (vertical coordination); - Between education and health sector ministries and their respective deconcentrated units (vertical-sectoral coordination); - Between the various administrative units and other institutions at the local level (horizontal-local coordination). The study aims at answering this question and at identifying starting points for possible solutions to these challenges. Research approach and the case of Malawi The purpose of this study is twofold. First, it seeks to contribute to the current debate on Good Financial Governance. Second, by obtaining a better understanding of the investigated issues, it aims at helping decision-makers in developing countries’ governments and donor agencies to develop a better understanding of the mechanisms at work undermining sound PFM in developing countries in sub-Saharan Africa. To fulfil this double purpose, a case study approach was deemed appropriate, which allows a detailed examination of a country’s PFM system, but also lends itself to careful generalisations. Malawi was identified to be a typical case for a poor sub-Saharan African country in many aspects, while special in others. It is a typical case because it is currently in the process of implementing a PRSP, a decentralisation strategy and PFM reforms all at the same time. Therefore, it can be expected that lessons drawn from this case analysis are to some degree applicable to other developing countries that undergo similar reform processes. On the other hand, at the time the study was conducted Malawi provided a somewhat special case with respect to the role of political commitment to transparent and pro- poor financial management. As a new government under president Bingu wa Mutharika had just been elected, great expectations were raised among donors, who believed to discern clear signs of the new administration’s genuine commitment to good governance principles. German Development Institute 19
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Publications of the German Developm
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Discussion Paper 16/2007 Schirm, St
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