Chifipa Mhango’s Don Consultancy Group’s moto is: ‘Unlocking African Solutions’
* Malawi as a country has massive potential and resources towards a strong economic growth trajectory
* However, a strong political will towards monitoring of all initiatives by Government remains imperative
By Duncan Mlanjira
The 2024-2025 National Budget that was presented in the National Assembly on Friday and is under debate, “has some positive elements to support a pro-poor approach and the only obstacle could be implementation”.
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This is the response from Chifipa Mhango, Chief Economist for South Africa-based Don Consultancy Group, saying “Malawi as a country has massive potential and resources towards a strong economic growth trajectory, however, a strong political will towards monitoring of all initiatives by Government remains imperative.
“It has to be acknowledged that poverty, inequality and high cost of living continues to dominate the economic landscape,” he said. “For instance, Malawi headline inflation rate is now at 35%, with food inflation rate at 44.9% — thus reflecting rising cost of living in the Malawi economy.
“Any Budget presented in Malawi must, therefore, also be geared towards addressing these challenges.
“I cannot fault the presented Budget on elements of dealing with these challenges at all, however, what I am interested on is implementation, and this should be monitored on a monthly basis by Malawi Government itself.
“Key measures to be considered, which I have lobbied for years are reducing reckless spending coupled with excessive borrowing, adhering to the project implementation with a regional balance and guidelines.
“In Malawi, for years, we have observed projects missing completion deadlines, with initial costs being elevated — this should be avoided in this Budget when it comes to implementation.
“The new concept to restructuring of the Budget from 10% to 30% towards development expenditure is a good start, as Malawi Government — regardless of a political party in Government — has spent on average, just 10% towards development in the past 10 years, with almost 80% on administrative expenditure.
”Such has derailed efforts towards high economic growth rates for the country. This is easy to monitor monthly, and I would recommend that, where there is diversion from the new principle of 30% towards development expenditure, there is immediate intervention — as this should not just be in a Budget statement only but rather reflected in expenditure patterns monthly,” said the Malawian Chief Economist, whose Don Consultancy Group’s moto is: ‘Unlocking African Solutions’ and tries to support Malawi Government for free.
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Many economic analysts and civil society organisations (CSOs) have always observed that some votes in the national budgets keep being carried over to the next financial plan as they are never implemented even after the resources have been allocated.
For the 2024-2025 financial year, Finance & Economic Affairs Minister Simplex Chithyola Banda outlines Government reform programmes undertaken to improve the effectiveness and efficiency of service delivery.
Public Finance Management Reforms
He reminded the House that in his Mid-Year Budget Review Statement, he alluded to the Government’s commitment to implementing the public finance management (PFM) reform agenda articulated in the Public Finance Management Strategy (2023-2028).
“The strategy’s main objective is to facilitate the attainment of sound fiscal management within the public service to realize sustainable economic growth and development for the country,” he said.
He acknowledge the support provided by development partners, including the World Bank, European Union, and the German Government (GIZ), saying: “Notably, the World Bank’s First Growth and Resilience Development Policy Operation, approved in December 2023, disbursed US$80 million to the Government following the achievement of crucial PFM policy reforms.
“Furthermore, with support from the World Bank, the Government is developing a new US$80 million Fiscal Governance Program for Results, which will build on the objectives of the recently launched PFM Strategy. Additionally, the European Union is supporting PFM with Euro 22 million and GIZ with Euros 4.5 million.”
He announced that the Finance Ministry has fully operationalised the Public Finance Management Act (2022) through gazetting the PFM Act Regulations, 2023 and that in the 2024/2025 Financial Year, they will go further by reviewing Treasury and Desk Instructions. This will provide clear guidance on processes and procedures at all levels of PFM operations.
State-Owned Enterprises Performance
In addition to the annual consolidated report for state-owned enterprises (SOEs) that are submitted to Parliament for transparency and accountability, the Ministry has developed a performance assessment framework to ensure that best-performing SOEs are properly recognized.
“This will promote a culture of excellence in SOEs for better financial management and service delivery,” he said. “The goal is to improve the performance of SOEs so that over and above service delivery, they should generate returns on Government investments and remit dividends.
“To further enhance the monitoring of revenue collected by SOEs, all 22 regulatory SOEs have fully migrated their revenue accounts to the Reserve Bank of Malawi (RBM).
“In the 2024/2025 Financial Year, my Ministry will roll out this arrangement to the remaining SOEs, including subvented organizations and trading SOEs. This arrangement will significantly improve dividends and surplus remittances, thereby widening the non-tax revenue base — and also reduce the tendency of the Government to borrow its own resources.”
Integrated Financial Management and Information System (IFMIS)
Through the Department of Accountant General, the Ministry will continue to build on the gains registered from implementing the SAP-based IFMIS.
“To this effect, efforts to ensure comprehensive financial reporting will continue through increased IFMIS coverage to all MDAs and Local Councils. Similarly, the Human Resource Management Information System will be integrated for seamless processing of Government Payroll and Human Resource related transactions.
“Further investments will be made in system resilience, stability, and data security controls.”
The Reserve Bank of Malawi
Treasury Single Account
The Accountant General’s Department is implementing the Treasury Single Account (TSA) initiative, which will enhance the organization, structure, and optimization of Government bank accounts and “once completed, this process is expected to improve the overall Government’s cash position”.
“The Accountant General’s Department has highly prioritized efforts to improve non-tax revenue collection through the digitalization of revenue collection and restructuring of bank account architecture to facilitate revenue collection.
“In this regard, all Government Agencies must open receipting accounts at Commercial Banks, which are linked to holding accounts at RBM. To facilitate timely transfers to RBM, a memorandum of understanding (MoU) has been signed with Commercial Banks requiring auto-transfers every 48 hours to the holding accounts.
“This process shall avail more resources to the Government, resulting in better services across the board and to complement the TSA efforts, talks are at an advanced stage to create a digital gateway enabling service-recipients to pay for Government services using Airtel Money and TNM Mpamba.
“The aggregated effect of these interventions will exponentially increase non-tax receipts and supplement domestic taxes.
Asset Valuation
The Department of Accountant General is leading an exercise to enhance accountability for Government assets as historically, Government fixed assets, including buildings, motor vehicles, equipment and furniture, were managed under the Department of Human Resources and Management Development (DHRMD).
“This approach was deemed inadequate as the existence and a number of assets received a greater weighting overvaluation and to
build on the progress achieved by DHRMD, the Accountant General’s department is consolidating records of Government assets in terms of unique identification numbers, locations, condition, and value of the assets.
“This is also in line with the International Public Sector Accounting Standards (IPSAS) accrual accounting practices being implemented by the Accountant General’s Department that Government should recognize all assets and liabilities, usually at market value or their value in use to ensure the balance sheet reflects Government’s actual financial position.
Effects of Cyclone Freddy in March last year
Poverty Reduction and Social Protection
To rebuild the economy on post-Cyclone Freddy, on the one hand, the Minister said it is imperative that the government continues to provide support to those in need and will, therefore, enhance the provision of social protection to the poorest and most vulnerable in the society.
It will thus continue implementing the social cash transfer programme (SCTP), which targets the ultra- poor throughout the country and reaches out to 292,449 households across all districts.
“The Government is currently conducting retargeting, and the number of beneficiary households is expected to increase to 382,457. On the other hand, a revision of benefit levels was approved using the rural inflation, which will result in a 71% increase in the average transfer amount per household from the current K9,000 to K19,000 per month.
“Under the implementation of the climate smart enhanced public works program, 362,450 participants have been enrolled and are working in 6,568 sub-projects focusing on soil and water conservation.
“Following additional financing from the World Bank, the enrollment target has been increased to 520,000 participants. This program has proved to be an effective and efficient short-term measure for reducing poverty and enhancing sustainable livelihoods.”
He further said the Government is also implementing the Savings and Loan Groups and Microfinance interventions, which are livelihood interventions “directed towards achieving the financial inclusion of the ultra-poor to help them gain resilient livelihoods”.
“Currently, 61,880 savings and loan groups are registered with the Department of Community Development, and 1,176,626 people are participating of which 76% are female.”
School feeding program has not been left out as an intervention that is designed to improve childhood nutrition, increase children’s ability to concentrate and learn in class, promote enrolment and regular attendance as well as to reduce drop-out rates.
The program currently reaches out to over 2,661 schools, with 2,771,588 learners as direct beneficiaries.
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