Transcript Malawi Public Expenditure Review

Malawi
Public Expenditure Review
Background and Overview
PER Dissemination Workshop
Capital Hotel, Lilongwe
21 November, 2007
Public Expenditure Review


PER is not an audit of expenditures
Scope is to assist Government to
critically review its operations and
the use of public resources:
• Identify policies to support fast and
equitable growth and wealth creation
• Improve the effectiveness, quality, and
equity in delivery of services to the
people of Malawi
Institutional arrangements for
Malawi PER 2006


Prepared by GoM, with assistance by WB
and CABS partners
Preparation overseen by ‘PER Taskforce’
• GoM officials from line ministries
• Chaired by Economic Affairs, in Ministry of
Finance

Chapters prepared by ‘PER Thematic
Working Groups’, chaired by respective
line ministry
Good progress in Macroeconomic
front since 2003/04


In 2003/04 Malawi was on the verge of a
macroeconomic crisis
Weak fiscal performance between 1999/00
to 2003/04:
• Domestic debt at 25% of GDP
• Domestic interest bill at 10% of GDP

But since 2004/05 GoM has taken rapid
steps to prevent a crisis, and has
reestablished macroeconomic stability
• Domestic debt down to below 14% of GDP in
2006/07
• Domestic interest bill down to 5% of GDP
Malawi is now
at a critical juncture



Reduction in interest bill has released
resources that can be channeled to
priority expenditures
GoM need to decide how best to utilize
these resources:
Report addresses two related questions:
• How best can GoM use these resources to
consolidate recent gains, and accelerate
economic growth and poverty reduction?
• What reforms should GoM pursue to improve
efficiency and equity of public expenditures?
What are the key priorities
for GoM over the next few years?



(i) stay the course with the macro
economic program, and continue reduction
of domestic debt burden
(ii) continue to strengthen the budget
process, payroll management, and debt
management, and take action to protect
public finances from the impact of external
shocks, notably weather
(iii) improve efficiency and equity of public
expenditures by implementing the key
measures recommended in this report
How should GoM use the savings
from domestic interest bill?

In addition, a strategic balance must be struck
between investing interest savings to:
• (i) accelerate retirement of domestic debt, to achieve
additional interest savings that can channeled to priority
expenditures at a later stage
• (ii) build up Malawi’s external reserves and/or purchase
drought insurance, as coverage to protect against
exogenous shocks
• (iii) expand investments in infrastructure and/or social
services, to boost growth rates and progress towards
the MDGs


The three ‘options’ above underpin much of the
analysis in the PER
GoM needs to carefully consider the costs and
benefits of each option
Structure of PER 2006




Discuss priorities in public financial management,
including to protect against external shocks
Identify measures to improve debt management,
and reduce debt vulnerability
Assess the implications of changing allocation of
resources across sectors for growth, poverty, and
MDGs
Assess the efficiency and equity of expenditures
in education, health, and roads (and assessment
in agriculture is ongoing)
• Four largest expenditure votes in the budget; account
for almost 60 percent of total voted expenditures
• Provide public services critical to accelerate growth

Assess expenditures on nutrition
• Added following the analysis in the 2006 Malawi Poverty
and Vulnerability Assessment (MPVA)
Headlines in Macro and Debt



Reforms to strengthen budget process and
payroll management should remain at the center
of the reform agenda
Reforms to insulate budget implementation from
the impact of exogenous shocks should be
pursued
Changing allocations across sectors can be
important but
• Maintaining sound macroeconomic policies is critical for
growth and human development indicators
• Ensuring the ‘quality’ of public expenditures in all
sectors is critical to accelerate growth and progress
towards the MDGs
Headlines in Education






Efficiency of education expenditures is low
Around 50 percent of the resources spent
on primary education are wasted, due to
drop outs and repetition
Increasing number of qualified teachers is
critical to raise quality & efficiency of
primary education
Two-track system in secondary (CSSs and
CDSSs) is inequitable and inefficient
Malawi’s University system is very
inefficient
The benefits from public spending in
education are not equitably distributed
Headlines in Health

Two areas are critical to improve efficiency
in the provision of health services:
• (i) Lack of skilled health workers and
overloading of the available staff results in low
quality of services
• (ii) Unavailability of even basic drugs, mainly
due to slow progress in reforming the Central
Medical Stores (CMS)

Medium-term financing for meeting GoM’s
target in HIV/AIDS programs needs to be
urgently identified; available funding will
run out within the next 2-3 years
Headlines in Nutrition



Malnutrition is the most severe challenge
facing Malawians, irrespective of their
income status and level of calorie
consumption
Current portfolio of nutrition interventions
in Malawi does not prioritize cost-effective
interventions
Interventions are not targeted at the most
vulnerable
Headlines in Roads

Road network is imbalanced:
• Small network of main roads is mostly paved and in
good condition
• The rest of the network, mainly rural roads, is unpaved
and mostly in poor condition



Funds spent on routine maintenance, have been
inadequate to meet maintenance needs of
network
There is a need to introduce planning and
prioritization in road maintenance and
construction activities
There has not been a poverty focus in the road
sector expenditure, and access to roads is heavily
tilted in favour of the richest households
Conclusions


Many areas to improve efficiency and
equity have been identified
Real challenge is the implementation
of the proposed reforms