World Bank notices public finance gaps
The World Bank says Malawi’s economic and public finance management remains poor as evidenced by failure of economic policies to reduce poverty and promote sustainable growth, among others.
In its latest Country Policy and Institutional Assessment, the Bretton Woods institution rated the country’s economic management indicator at 2.2 points, lower than both sub-Saharan Africa (SSA) and International Development Agency’s (IDA) borrowers’ average of 3.2 points and East and Southern Africa average of 2.9 points.
Among others, the bank says Malawi continued to face macroeconomic imbalances, lack of progress in fiscal consolidation and debt restructuring while describing public financial management rating as low.
Reads the report in part: “The country faced widening macroeconomic imbalances and stagnating growth, mainly due to unsustainable debt and the effects of multiple shocks, including an outbreak of cholera and Cyclone Freddy.
“Lack of progress in fiscal consolidation, debt restructuring and donor support is a critical factor in achieving macroeconomic sustainability, underscoring the need for immediate action.”
The report further indicated that public finance management was rated low, indicating issues with managing arrears and continued corruption and that progress in procurement and audit systems was limited.
The country’s overall rating remained unsatisfactory at three points, which is below both SSA average and IDA’s borrowers average of 3.1 points.
This means the quality of economic policies that the government has implemented to reduce poverty, promote sustainable growth and effectively use development assistance has remained worse in the past year.
In an interview yesterday, Malawi Economic Justice Network executive director Bertha Phiri attributed the poor performance to lack of sound efforts on both fiscal discipline and domestic resource mobilisation to achieve balance and sustainability.
She said: “Fiscal prudence is not there and the executive should diversify income generation strategies by exploring new sectors such as tourism, technology and renewable energy.”
Commenting on the low rating on public finance management, Public Accounts Committee of Parliament chairperson Mark Botomani said in an interview yesterday that the report validates its observation that controlling officers in ministries, departments and agencies (MDA) are still not following designated processes.
“It all boils down to failure to uphold laid down procedures. It is quite unfortunate that controlling officers in MDAs cannot appreciate the need to use the legal instruments such as the Public Finance Management Act to guide them in management of public resources,” he said.
Economics Association of Malawi acting president Bertha Bangara Chikadza said yesterday that although the country faces revenue challenges because of the current drop of tax revenues, the government needs to remain vigilant on checking its borrowing limits.
“Striking a balance between fiscal needs and prudent financial management remains a priority,” she said.
Public finance management is one of the key conditions by development partners, including the International Monetary Fund and bilateral donors.
The Country Policy and Institutional Assessment is the World Bank’s diagnostic tool that annually assesses the quality of policies and the performance of institutional frameworks in 54 African countries.
