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Stefan Leider et al. 5.2 PFM in practice: ad hoc planning and budgeting, informal practices and uncertainty As the preceding section illustrates, the formal framework for the different PFM processes at central and local government level in Malawi is relatively well defined and, thus, should in principle enable the Government of Malawi to implement strategic policies through the national and local budgets. In practice, however, it routinely encounters considerable difficulties with translating MPRSP priorities into the budget and implementing it accordingly. One reason is that activities listed in the MPRSP and the respective costing exercises have not been clearly linked to budget programmes, sub-programmes and items (Durevall / Erlandsson 2005, 29). Furthermore, in practice it is not entirely clear how spending needs are reconciled with the topdown resource constraints provided by the MTEF. Table 4: Approved and actual recurrent and development expenditure as a share of GDP Recurrent Budget Development Budget Fiscal Year Approved Actual Approved Actual 1994/95 27.0 34.0 6.8 7.6 1995/96 21.6 24.3 7.0 6.5 1996/97 19.1 18.4 4.9 4.8 1997/98 20.4 22.6 5.1 5.1 1998/99 15.6 18.4 9.4 8.6 1999/2000 15.9 17.8 9.3 10.5 2000/01 19.8 22.6 10.6 10.1 2001/02 19.4 24.6 6.9 7.3 2002/03 23.2 32.0 8.2 7.7 2003/04 20.4 33.0 8.1 10.3 Source: Durevall / Erlandsson (2005, 9) 76 German Development Institute
Public Financial Management for PRSP Implementation in Malawi As a consequence, hard budget ceilings are neither clear nor consistently rolled out and enforced (CABRI 2004, 40), and as Table 4 shows, budget outcomes differ substantially from planned allocations, both for recurrent and development expenditures. Although there have been notable improvements in overall variance on expenditure, in particular with regard to overspending on individual budget votes, important compositional shifts and thus significant re- prioritisation in the course of budget execution occur. exist (see Figure 6). This phenomenon is particularly marked for the fiscal year 2001/02, when overall variance on expenditure was only slightly above 10 percent, but compositional shifts were extremely important with more than three quarters of budget votes receiving either 10 percent more or 10 percent less than originally budgeted for. Figure 6: Variability of budget outturn with respect to original budget 60 50 40 30 20 10 0 99/00 00/01 01/02 02/03 03/04 % Variance on Expenditure % Votes receiving less than 90% of budget % Votes receiving more than 110% of budget Source: IMF (2004a; 2004b) According to the IMF, the observed poor outcome of the budget process is rooted in the fact that formal institutions and procedures bear little relevance for PFM practice in Malawi as the directives of the budget are not being observed by the senior leadership, and public expenditure management regulations that bind the administration are not fully enforced (IMF 2004a, 7). Or, to repeat the image invoked by as a recent study commissioned by DFID on German Development Institute 77
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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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Bibliography 151 Annexes 157 Tables
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Boxes and Tables in the Annexes Box
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DS EHP ESAF EU GBS GDP GoM GRF GTZ
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Discussion Paper 16/2007 Schirm, St
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