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<strong>Public</strong> <strong>Financial</strong> <strong>Management</strong> <strong>for</strong> <strong>PRSP</strong> Implementation in Malawi<br />

Part II: Empirical Findings<br />

5 Worlds Apart: The Theory and Practice of <strong>Public</strong><br />

<strong>Financial</strong> <strong>Management</strong> in Malawi<br />

The <strong>for</strong>mal legal and institutional framework <strong>for</strong> public financial management<br />

in Malawi has undergone a series of re<strong>for</strong>ms since the first free multiparty<br />

elections in 1994 and even prior to that. New legislation regulating<br />

finance, audit and procurement was written, providing <strong>for</strong> relatively clear-cut<br />

responsibilities and time schedules of the budget process in Malawi. Accordingly,<br />

various recent studies on Malawi’s PFM system conclude that the legal<br />

and institutional framework <strong>for</strong> PFM in Malawi is relatively well designed. In<br />

principle, it provides a good starting point <strong>for</strong> a sound management of public<br />

finances (c.f. Rakner et al. 2004, 14–15, 18). For example, the World Bank’s<br />

2003 Country <strong>Financial</strong> Accountability Assessment <strong>for</strong> Malawi states: “When<br />

compared to most developing countries, Malawi has a good legal and institutional<br />

framework <strong>for</strong> public sector financial management and accountability.”<br />

(World Bank 2003, v). There<strong>for</strong>e, one could expect that the <strong>for</strong>mal legal<br />

and institutional PFM framework in Malawi should provide in principle <strong>for</strong><br />

effective fiscal and expenditure planning, budget preparation, execution, and<br />

control in line with the priorities set in the Malawi Poverty Reduction Strategy<br />

Paper (M<strong>PRSP</strong>).<br />

At the same time, however, many assessments judge the budget process in<br />

Malawi to be extremely weak (c.f. IMF 2004a; IMF 2004b; see Table 4 and<br />

Figure 6 below). The main reason <strong>for</strong> this is that <strong>for</strong>mal institutions and procedures<br />

bear little relevance <strong>for</strong> PFM practice in Malawi. As a recent study<br />

on Malawi’s <strong>for</strong>mal and in<strong>for</strong>mal PFM institutions commissioned by DFID<br />

states:<br />

“The budget process is a theatre that masks the real distribution and<br />

spending. All the actors, from civil society, government, and donors seem<br />

aware that many of their statements and actions have little bearing on<br />

[the] actual distribution of resources” (Rakner et al. 2004, iv).<br />

The cited studies of Malawi’s PFM tend to focus on central government.<br />

However, the findings of the field study conducted <strong>for</strong> this research in 2005<br />

confirm that their assessment is also valid <strong>for</strong> local government in Malawi. It<br />

found ample evidence that Malawi’s local PFM-system is characterised even<br />

German Development <strong>Institut</strong>e 55

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