11 years of PFEM hide-and-seek yields cash-gate

Those who have keenly followed fiscal issues in the country will know that reforms on Public Finance and Economic Management (PFEM) date back to 2002 when the Malawi Financial Accountability Action Plan (MFAAP) was developed.

This was followed by the enactment of important, yet largely ignored pieces of legislation, namely the Public Finance Management Act (PFMA), the Public Audit Act (PAA) and the Public Procurement Act (PPA).

But despite these frameworks, public finance management in the country has remained a joke during the last 11 years these documents have been in place. There was no effort really to operationalise these guiding tools.

Of course, there were efforts, especially from development partners, to come up with frameworks that would link the country’s public finance cycle as a whole—from planning through budgeting, accounting, procurement, auditing and everything else in between.

I accept that one or two PFEM action plans were developed since 2006 to guide execution of public finance and economic management reforms in Malawi, but it was all donor-driven, with government seemingly uninterested in pushing for any major changes.

That notwithstanding, donors pumped a lot of resources into PFEM over the years through various initiatives.

For example, the World Bank’s Financial Management Transparency and Accountability Project (Fimtap), which wound up in 2009, was one such endeavour. Then there was one supported by the European Union (EU) called Capacity Building Programme for Economic Management and Policy Coordination (CBPEMPC), which ended in 2007.

Other donors such as Norway, the United Nations Development Programme (UNDP), Jica, the Millennium Challenge Corporation (MCC) and Britain’s Department for International Development (DfID) poured a lot of money into PFEM to safeguard public resources as well as improve their efficient and effective use.

By the time I was leaving the Ministry of Finance in 2010, a PFEM task force—in which I was the secretary—developed the PFEM Situation Analysis Report—that was expected to be a basis for a common PFEM financing mechanism in the form of a Sector-wide Approach (SWAp) and also guide the basket’s programming. The report also identified glaring gaps that in critical areas such as budgeting, accounting, procurement and auditing that the PFEM programme was expected to address. But, as it turned out, nothing happened and everything has come crashing down.

What is the point of this? I am trying to explain the donors’ frustrations with the Government of Malawi; that after a lot of time and resources invested in PFEM over the last 11 years, we can have a financial scam of the cash-gate shape and size.

I appreciate why the donors, including the International Monetary Fund (IMF), have delayed budget support. For with cash-gate, it means that every major PFEM component has collapsed.

Take planning, for example. Going by the ghost projects that were fed into the Integrated Financial Management and Information System (Ifmis) and the subsequent billions of kwacha that were stolen through the dubious payments, it means that the Ministry of Economic Planning and Development (MEP&D) as a central planning authority is irrelevant because no infrastructure initiative can be implemented, let alone paid for, without being vetted by this ministry.

And happened to the MEP&D’s monitoring and evaluation role? What about the budgeting component in PFEM? It, too ,has lost its moral compass not just within the Ministry of Finance where it is housed, but throughout the PFEM system.

I mean, given that it is at the centre of cash-gate, can one really believe that Treasury’s Budget Division was really in charge of the cycle that is the budget process?

Was the division really carrying out credible budget planning, resource allocation, preparation, approval and execution? Search me.

And where was the accounting and financial management system in all this? I am mainly talking about the embarrassed and embarrassing Accountant General’s Department, the Reserve Bank of Malawi (RBM) and the National Local Government Finance Committee (NLGFC).

While all the systematic looting was happening, were these key players in the accounting and financial management system operational?

What about the procurement component? There is no question that public procurement has gone to the dogs in Malawi. And to think that Fimtap and UNDP pumped a lot of money into procurement to make sense of the PFEM system sounds like a bad joke.

Auditing is another disgraceful PFEM component that lost its bearings long time ago. Of particular concern is the Internal Audit Common Service comprising the Central Internal Audit Unit under the Ministry of Finance and internal auditors placed in various government agencies and departments.

These two institutions collapsed long time ago and no one is interested in bringing them back to the world of the living. What a shame. So, when all the chaff blows away, the truth is laid bare: Malawi’s PFEM system has collapsed.

Only a surgical re-engineering can bring it up and give it a rebirth.