Continued revelations of plunder of public resources is putting the country’s prospects of attaining direct budget support on the line, governance experts have warned.
They were reacting to remarks by one of the country’s key donors, Germany, that revelations of theft and corruption in the public sector are a manifestation that Public Finance Management systems are weak.
Since the country’s donors stopped direct budget support in 2014 due to Cashgate, the country has been experiencing budget deficits which have kept widening as the government resource envelope failed to match expenditure.
German Ambassador Jürgen Borsch, in a written response, was commenting on the Malawi Growth and Development Strategy (MGDS) III mid-term review report that showed donors still do not trust government systems to directly inject their resources.
The envoy said the MGDS III outcome was not surprising as evidenced by numerous reports, including by Transparency International, that substantiate a widespread embezzlement of public funds and corruption.
He said: “It is key to initiate a process of structural transformation. Currently, domestically-generated resources do not cover government’s recurrent expenditures. The loans are mostly used for consumption, not capital expenditures (investments).
“In the past years, the annual budgets have been characterised by lower-than-forecasted expenditures and higher-than-calculated expenditures (expenditure overrun). This resulting in massive fiscal deficits and an increasing debt burden.”
Borsch said such trends underline the need for improvement in budgeting process and economic forecasting, adding the partial dysfunctionality of the public finance management system is also evidenced by the latest Annual Audit Report of the National Audit Office.
Meanwhile, governance expert Henry Chingaipe has warned that Borsch’s statement means donors will continue with off-budget means of support to Malawi.
In an interview on Monday, Chingaipe said Malawi has good public finance management systems and laws in place but implementation and enforcement have been weak due to lack of strong political leadership.
He said: “The statement simply means they may not resume direct budget support fearing the likelihood of having their taxpayers money stolen within government systems. In the event that they consider providing budget support due to the goodwill for the new administration, the support may come with stiff conditions.”
Chingaipe said the new government has come with a glimmer of hope to correct the lost leadership credibility, adding that government should work on the integrity and mindset change of the people who work behind the established systems as some of them are those behind the plunder.
There was no fresh comment from the Ministry of Finance on steps taken to seal the systems loopholes, but recently Integrated Financial Management Information System (Ifmis) manager Frank Mangwaya said the newly-installed Ifmis was water-tight from abuse.
He said all technical staff that operate or access the new Ifmis were trained and that the software has a wider scope of functionalities which include asset, projects, contracts, inventory, and fleet management, among others.
In his paper titled ‘Public Purse: Use, Misuse, Abuse of Government Resources’ a legal expert Professor Dan Kuwali noted that the country’s public finance management laws have loopholes that undermine the fight against theft and abuse of government funds.