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Budgetary Theatre Actors, Formal/Informal Institutions, and Outcomes in Malawi Public Finance.

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Presentation on theme: "Budgetary Theatre Actors, Formal/Informal Institutions, and Outcomes in Malawi Public Finance."— Presentation transcript:

1 Budgetary Theatre Actors, Formal/Informal Institutions, and Outcomes in Malawi Public Finance

2 Malawi Social Context HIV/AIDS adult prevalence rate 15% and 19.5% among pregnant women 65.3% Poor, 28.8% extreme poverty High Inequality – poorest 20% consumes 6.3%, richest 20% consumes 46.3% 85% Exports Agriculture, 30% GDP, 75% small holder Tobacco, tea, sugar, maize

3 Public Finance Inflation 13.5%, Growth 2%, Deficit 7.6% GDP IMF funding stopped in 2000, resumed in October 2003 Debt service ratio 19%, debt/exports 267%, debt/domestic revenue 472%

4 Formal Political Regime Banda Regime end 1993 Muluzi (UDF) , Weak Muluzi successor likely to win, Mutharika Presidential, Single-Member Districts, Unicameral

5 Informal Political Context Regional representation: UDF (South), MCP (Centre), AFORD (North) Personalist, patronage politics Weak civil society (Churches) Narrow commercial elite, agro- export elite tied closely to political elite

6 Budgeting and Pro-Poor Planning Budget is a theatrical production that leads actors far from stated intentions. Room for some executive autonomy, earmarking and small patronage that occasionally helps the poor. More often, and more dangerous, large- scale corruption with devastating macro- social effects.

7 Budgeting Actors Public actors: Executive, Legislature, Independent agencies, political parties. Civil society: Media; Private sector; Churches; NGOs. Donors: Bilateral (CABS; non- CABS); Multilateral; International NGOs.

8 Stages of Budgeting Long-Term Planning Annual Formulation Legislative Authorization Executive Implementation Internal and External Oversight

9 Institutions Formal: Laws, International Agreements, Resource Constraints Informal: Patronage, Kin, Ethnicity, Religion, and Region.

10 ACTORS Pro-Poor/ Consistent Public Civil society Donors INFORMAL INSTITUTIONS Patronage Networks Region, Kin, ethnic Religious FORMAL INSTITUTIONS Laws Budget Constraints Intl Agreements Figure 1: The Political Economy of the Budget in Malawi Pro-Poor/ Inconsistent Anti-Poor/ Inconsistent Anti-Poor/ Consistent Stages Planning Formulation Passage Implementation Oversight

11 Stage 1: Planning President, MOF, MOP, Donors Formal: MPRSP, EGS, IMF Agreements, Donor Conditions Informal: Electoral Incentives, Corruption Opportunities, Donor Boards, Donor Home Countries Wildly optimistic growth, inflation, aid, interest estimates – inconsistent Civil society + parliament silenced, but overestimates and MPRSP lock-in some pro- poorness

12 Formulating a Budget Pres, MOF, Ministers, Bureaucrats, Donors Formal: Plans, Resource Envelope, Donor Agreements, PPEs Informal: President secure, Mins compete, CCE dominated, Bureaucrats overruled, Mins and Donors go off- budget Room for accommodation, major corruption, donor uncertainty PPEs and minor patronage

13 Passage in Legislature MOF, Civil Society, Committee, Parliament, donors Formal: Consultation, Committee amendments, Vote Informal: Consultation PR, Allowances for exec. privileges, MP careers, Party Discipline Executive proposal little substantive change, though for the better Perhaps some geographic distribution

14 Implementation MOF, Reserve Bank, Controlling Officers, Mins, Civil Society, Donors Formal: Monthly MOF Resource Allocation Committee, Controlling Officers, Cabinet Committee on Economy, PPEs, Interest/Personnel Informal: Cash Budget, Pres and MOF dominate CCE, Mins dominate Controlling Off., MPs pressure Politically powerful overspend, Mins switch lines, poor records, debt Constituencies may distribute, PPEs help some, but resource ceiling limits pro-poor

15 Oversight Presidents office, Parliament, Semi-independent Agencies, Donors Formal: Statutes (2003), Controlling Off. Accountability to SPC and Treasury, Internal Audit, Public Accounts Committee, Anti-Corruption Bureau, Donor Agreements Informal: SPC no incentive, Mins move COs, Committees unfunded, External auditors poorly funded, Reporting Inconsistent Little analysis of consistency. Mostly oversight on bribes. Donors press institutional change but unreliable, inconsistent. Civil society excluded, elections distribute patronage.

16 Implications Strengthen positive formal institutions: Build aid into democratic budget process. Strengthen parliament, committees, budget authorization and appropriation, Internal and external accountability. Accept and formalize positive informal institutions. Regionalize budget, constituency funds for MPs, civil society sectoral approach. First year of mandate as moment for change. Minimize negative formal and informal institutions – build delays and shortfalls into estimates of aid flows. More reporting on cash budget.

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