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Malawi Economic Justice Network - Comments on the proposed Malawi Budget 2001-2002

1. Introduction
 
The aim of this short report is to try and answer the question 'is this a budget that will help the poor?'.
 
As such we look firstly at the spending on the social sectors. Specifically we discuss the Priority Poverty Expenditures proposed in the PRSP Findings to Date Document. The main conclusion is that for the majority of expenditures there is not enough baseline information (i.e. sources of funds, comparison to last year and specific outputs) to allow monitoring. Secondly no extra guarantee was made in the budget that this money will actually be spent according to the budget, which is very worrying given what has happened in previous years. Lastly no commitment was given to producing regular public figures on these PPE's during the year, which will again make monitoring very difficult.
 
Secondly we look at spending on the accountability agencies. Largely here expenditure is increasing which is a welcome development. However, there are some serious causes for concern. Specifically the budget for the National Assembly is set to decrease, and the office of the Ombudsman (arguably the most effective accountability agency to date) is only set to increase by 3%. Lastly overall expenditure on these agencies is still very small in comparative terms, even allowing for the proposed increase. The Government this year will still spend more on State Residences than on the ACB, Ombudsman, HRC, Min. of Justice and the National Audit Office combined.
 
Thirdly we look at the Macro Economic elements of this year's budget. Specifically we note with concern that the budget deficit (including grants) is set to increase, despite an extra 4.7 billion MK from Debt Relief. We also note with concern that even after debt relief, servicing public debt remains the Government's number one expenditure, more than Health or Education.
 
Finally we look at what we call 'non-poverty reducing expenditures'. These are those expenditures we feel are contained in the budget which cannot be said to contribute to poverty reduction. We note with concern that a number of these have increased substantially from last year's budget; of particular note is the huge increase in Statutory Expenditures under the new budget line 'refunds and repayments'. This is predicted to be 2 billion MK (more than the whole Ministry of Agriculture) and is allocated to resolving issues such as the APEX and SECUCOM cases.
 
Throughout the report, all comparisons made are between last years and this years proposed figures. Revised figures are also included for last year, to show the variance between what was approved and what was actually spent.
 
Comparative increases are based on deflating this years proposed expenditure to last years prices. This was done using the official NSO deflator figure of 31.3%.
 
Social Sector Spending
 
The table below outlines overall changes in Social Sector Spending. Overall the Government commitment to spending the largest share of its income on the social sectors (38% of recurrent expenditures) has continued which is commendable. The main concern however is that these sectoral allocations will not translate into actual spending on poverty reducing activities. The budget has changed very little from last year in terms of mechanisms for monitoring and ensuring expenditure on budgeted activities, which is a serious cause of concern
 
Social Sector Spending 2000/01 Approved 2000/01 Revised 2001/02 Estimate 2001/02 Adjusted for Inflation
(Using the NSO Official Deflator Figure of 31.3%)
Increase or Decrease Adjusted for Inflation
Total Budget Ministry of Health and Population 3,086,952,760 3,456,829,986 5,302,565,352 4,038,511,312 +31%
Total Budget Ministry of Agriculture & Irrigation 1,675,311,136 3,671,553,183 2,542,784,114 1,936,621,564 +16%
Gender, Youth and Community Services 162,096,454 844,896,539 454,530,728 346,177,249 +14%
Total Budget Ministry of Water Development 1,592,143,100 9,830,514,750 2,140,153,274 1,629,972,029 +11%
Total Budget Ministry of Education, Science and Technology 5,574,488,412 3,008,099,684 5,864,177,500 4,466,243,336 -20%
Total Budget National Roads Authority 1,900,000,000 3,798,082,764 1,796,000,000 1,367,859,863 -28%
Total Budget for Police Service 644,780,884 549,390,971 582,792,997 443,863,669 -31%
 
During his speech, the Minister made considerable reference to the PRSP Findings to Date document. This document gives a summary of the discussions held to date during the PRSP formulation process. Specifically it outlines twelve key Priority Poverty Expenditures identified during the consultations held to date. These are Credit, Rural Feeder Roads, Community Policing, Agricultural Extension, Teaching and Learning materials, Teacher Training, Teacher Salaries, Drugs, Health worker training, Health worker salaries, Boreholes and the Targeted Input Programme.
 
These 12 areas are also reflected in the report made to Parliament by the Budget and Finance Committee following extensive consultation and discussions.
 
At a very general level, the budget appears to contain provision for each of these areas, which is commendable. However, what the budget did not contain was the essential changes recommended by both PRSP and the BAF Committee in the presentation, reporting and guarantees needed that these expenditures will actually be made. Specifically three areas need to be addressed.
 
  1. Firstly the presentation of the PPE's is not clear at all. What was requested was a clear detailing of expected outputs, the cost, the comparison with last year and a breakdown of where the funds are coming from (Donors, Govt, or HIPC). This is not available for any of the 12 areas identified.

    For example, the critical need to train nurses and other health workers was an agreed area of priority expenditure. Although there is a budget for nurse training, the budget documents give no indication of how many nurses they want to train or at what level. There is also no indication of whether the figure given represents an increase on last year, and how the funding will be broken down. Without this data as a baseline, it will be virtually impossible to show whether or not the Government is achieving its targets and the maximum number of health workers are being trained this year.
  2. Secondly, there has been no increased commitment by the Government to release figures on these key areas as the year progresses. There is apparently no change from last year in this respect. This is not good enough, as information must be released clearly and in a timely manner if any effective ongoing monitoring of these expenditures is to be carried out. Much was made by the Minister in his speech of the availability of figures on the Internet, but this is simply not the case. The most up to date figures available on the web or elsewhere date from December last year, and are at a level of aggregation that makes them virtually unusable. If this system continues unchanged this year monitoring will not be possible in any meaningful sense.
  3. Thirdly, the PRSP Findings to Date Document and the Budget and Finance Committee report recommended that Government guarantee the key Priority Poverty Expenditures. Specifically the money could not be used for any other activities without firstly asking the permission of Parliament. Unfortunately, despite verbal commitments by the Minister in his pre-budget consultations to the creation of 'protected' expenditures, there was no reference made to protecting any Government expenditures in this year's budget. As a result there is nothing to prevent the same situation as last year occurring where money allocated for key activities such as teacher training was diverted to other activities.
 
MEJN feels that without these three changes to the budget this year, it will not be possible to monitor these expenditures in any meaningful sense, and if not experience has shown that the laudable commitments of the budget often do not translate into actual Government spending on the key areas that will reduce poverty in Malawi.
 
HIPC
 
This year the Government will receive 4.7 billion MK in HIPC Debt relief ($58.75 million). In the six months from December 2000 to June 2001 it also received $14.7 million. The figure this year amounts to 13.75% of all discretionary expenditure. All of the HIPC funds must be spent on poverty reduction. The budget this year did not give any detail on how the money received in 2000-2001 was spent, nor any indication of how the money is being allocated over the current year. However, the Minister has since given the following verbal breakdown:
 
HIPC Indicative Expenditure 2000-2002
 
Item Expenditure 2000/2001 (MK million) Expenditure 2000-2001 ($ millions) Expenditure 2001/2002 (MK million) Expenditure 2001-2002 ($ millions)
Drugs 270 3.6 547 7.3
Primary Health Care - - 202 2.7
Nurse training - - 82 1.1
Teaching materials 180 2.4 457 6.1
Teacher training - - 285 3.8
Boreholes - - 315 4.2
Dam Rehabilitation - - 50 0.7
Extension - - 202 2.7
Youth/ Community Services/ Vocational Training - - 142 1.9
Rural Roads 63 0.84 202 2.7
Tourism - - 130 1.7
Commerce - - 153 2.0
Mining - - 60 0.8
Total 513 6.84 2827 37.7
Priorities not identified - - 1739 23.2
Overall total (both years) - - 4566 60.9
 
Although this extra detail is welcome, far more information will have to be forthcoming in line with the three requirements listed above for clear budgets including sources of funds, timely information and guarantees if we are to be sure this crucial opportunity is maximsed. It is essential that this is done if monitoring is going to be possible, and we are to ensure that this invaluable relief actually impacts on poverty.

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