Treasury, councils discuss K20bn bailout
Treasury has given councils some hope after discussing their proposal for a K20 billion bailout package to settle outstanding payment arrears dating back to several years ago.
Last month during a pre-budget consultation meeting with Finance Minister Felix Mlusu, the Malawi Local Government Association (Malga) appealed for a bailout arguing that councils have huge debts that have come about due to inadequate funding disbursed to councils.
On Friday the Minister of Finance held another round of talks with councils on their sought bailout package – a discussion, which sources say, demonstrates Capital Hill’s commitment to ensuring that councils are up and running.
Three officials who attended the meeting indicated that the Treasury has expressed willingness to provide the bailout estimated at K20 billion on condition that the office of the Auditor General should verify the outstanding arrears.
In an interview, Treasury spokesperson Williams Banda, somehow collaborated on what our sources told us, that the government wants the arrears audited but indicated that the bailout package is not yet a deal done.
Said Banda: “Treasury has not yet agreed on bailout but want to have arrears audited by the Auditor General. Treasury has advised councils to be current and tap from the low hanging fruits in resource mobilization…properly manage the social contracts with citizens. Improve on infrastructure development and resource mobilisation”
The meeting which took place at Capital Hill brought on one table officials from councils, Malga, Ministry of Local Government and Rural Development and Treasury.
Ministry of Local Government and Rural Development Anjoya Mwanza also said the bailout has not yet been agreed upon but is under discussion. Mwanza said the arrears have come about due to inadequate funding.
“The arrears are in form of utility bills such as electricity and water particularly in district hospitals, suppliers or tyres, motor vehicle maintenance, salary arrears for direct staff, pension and taxes,” Mwanza said.
In a telephone interview executive director for Malga Hadrod Mkandawire said the discussion on Friday gives them hope of government’s commitment to bailing out councils which will help to boost the morale and performance of local government.
Mkandawire said for a long time government has deliberately provided low
funding to councils to cripple them operationally so that they do not perform and the central government should use this as excuse to still continue performing roles and responsibilities that are supposed to be with councils.
“We are glad to note that the new administration is committed to live by the dictates of the decentralisation policy. Provision of the bailout package is an indication of that commitment. Let the Auditor General verify the arrears and councils should get the bailout package,” said Mkandawire.
Councils have always decried low funding and government’s failure to fully devolve not only powers and responsibilities but also corresponding financial resources to allow councils implement their mandate effectively.
The decentralisation policy instructs the central government to transfer five percent of Net National Revenues (NNR) as General Resource Fund (GRF) or Unconditional Grants to councils. But our analysis has shown that for the past 23 years since the policy came into force, this provision has not been fully complied as funding to councils is usually lower than this set threshold.
