Late reporting under mines public finance rules—IMF

The International Monetary Fund (IMF) says the Malawi Government’s tendency to produce reports late undermines the capacity of local authorities to manage public finances effectively.

The practice goes against the commitments the government made in the Memorandum of Economic and Fiscal Policies with the IMF.

In the latest IMF flagship magazine Finance and Development, IMF analysts Ian Ball, John Crompton and Dag Detter further cautioned that lack of access to critical information on public resources, including the worth of its public sector deprives it of crucial information that could greatly improve the management of public services and the safety of public finances.

The analysts further said governments would benefit “from complementing their current fiscal rules with a primary rule based on net worth that more comprehensively reflects their financial position”.

Most governments, including the Malawi Government, measure their financial health, and set fiscal policy, using very simple measures: the relationship between income and expenditure and the amount of outstanding debt, often measured as a percentage of gross domestic product.

Economic analyst and researcher Exley Silumbu said in an interview on Tuesday that the government’s failure to produce timely financial reports on the government’s assets, including the performance of State-owned enterprises undermines the government’s public finance management programmes.

He said: “It means there is no reliable source of information for the government to base its projections on.

“So, if the government bases its projections on outdated and inaccurate information, it becomes a challenge to plan and manage the use of the resources.”

Silumbu said this goes all the way through to the monitoring and evaluation phase because “you cannot effectively evaluate a programme that was based on inaccurate information”.

But in a separate interview, Auditor General Thomas Makiwa allayed concerns on the late publishing  of reports, saying the delays are not intentional, but a result of the nature of the environment in which those reports are produced.

He said: “The process to develop the annual reports is long and involves many players.

“The parastatals have to produce the reports, the board has to approve them and then an external auditor has to vet them before we publish.”

Makiwa said there are situations when the parastatal has not produced the report or may not have a board in place to approve the report or the external auditors who we usually outsource our services to may have not submitted them.

“All these delays limit our capacity to compile the reports and publish them on time,” he said.