Councils to get K3.2bn arrears

Finally, local government councils can breathe a sigh of relief as government has U-turned on its earlier decision not to disburse the K3.2 billion arrears dating back to the 2023/24 financial year.

The U-turn comes after the Malawi Local Government Association (Malga) warned that local councils risked lawsuits from suppliers of goods and services if government maintained its stance of not disbursing the funds on the basis that the funds in question were mere estimates.

During an appearance before the Parliamentary Committee on Local Authorities and Rural Development in Lilongwe on Friday, National Local Government Finance Committee (NLGFC) executive director Kondwani Santhe said they have started processing the payments.

The K3.2 billion comprises K389 million for District Development Fund (DDF), K1.3 billion for Other Recurrent Transactions (ORT), K171 million for Water Structure Fund, K975 million for Constituency Development Fund and K366.3 million for city roads maintenance.

Santhe said for the first time no council will lose money from the 2023/24 allocations unlike in the previous years where ministries, departments and agencies (MDAs), including councils would forfeit funds not disbursed by the close of a financial year.

He said: “We have almost finalised all the transfers to the councils. Even for the new financial year, almost 80 percent of councils have received the April funding. It takes about two to three weeks for a funding process to be completed.

“The list had 12 councils with spontaneous erratic funding, and because of the reconciliation which we had with the Accountant General, there is that assurance that they will get their funds or indeed some have started receiving the funds.”

In an interview following the U-turn, Malga executive director Hardrod  Mkandawire, while applauding the decision, said the councils were yet to get communication on the processing of the said arrears.

“What I can confirm is that some councils have started receiving the April 2024 funding, but on the arrears, no, they haven’t,” he said.

Mkandawire’s position on  the disbursement of the arrears corroborates the sentiments of most committee members, including chairperson Horace Chipuwa who said the councils were yet to start receiving the funding.

Santhe told the committee that all processes were completed and that “by Monday [today] all councils will have received the 2023/24 arrears”.

On reasons for the delays, he partly attributed it to technical challenges, especially because the government’s electronic payment system, the Integrated Information Management System (Ifmis) is centralised, as such, MDAs physically go to the Accountant General’s office to process payments.

Said Santhe: “At NLGFC, our network is also not in the office because we have been cut twice due to road construction, meaning we are not connected to the central Ifmis and we have to go to the Accountant General’s office to process payments.

“At some point, there were also vouchers or transactions which were left hanging in the system, either because the Accountant General has not completed the transaction in the system or on our own as NLGFC we have not run thoroughly the reconciliation or the councils not informing us of months which payment was missed.”

On the other hand, Chipuwa asked Secretary for Local Government, Unity and Culture Richard Hara to clarify comments in The Nation newspaper last Tuesday that the money will not be paid because it was simply an estimate.

In response, Hara said: “What I said is that most of the times, disbursement by Ministry of Finance is based on cash flow and what they have managed to collect in that period. Basically, a government budget is much of an estimate because you cannot precisely say we will collect so much.

“At Local Government, we don’t determine what we should receive. We are equally concerned with not being funded in full.”

He added that the country has been through liquidity challenges due to maturing of sovereign loans, which has resulted in the Accountant General’s Department prioritising payments, essentially leading to delays for other transactions.

In the 2024/25 National Budget, Treasury has allocated K488.1 billion to local councils. Out of this, K379.2 billion is for personal emoluments, K60.4 billion is for development projects while K48.4 billion caters for ORT.

Malawi has 35 local government councils comprising four cities, three municipalities; namely, Luchenza in Thyolo, Kasungu and Mangochi and 28 district councils.