Delegation of the European Union to Rwanda

Accountability for all: Strengthening EU Support to public finance management in Malawi

06/03/2020 - 11:57
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On 27 February 2020 the European Union, together with the Ministry of Finance, Economic Planning and Development, launched the Chuma cha Dziko programme to educate Malawian citizens about their role in making public services more accountable in public finance management (PFM). Chuma cha Dziko in Chichewa means "wealth of the Nation". The EU is contributing EUR 22 million to this project.

In welcoming the programme, the Minister said European tax payer's money will be put to good use to achieve value for money and that the areas covered under this programme are very important for Malawi:

    • Procurement and contract management is weak as an initial contract price of MWK 2 billion can easily end up costing MWK 10 billion resulting in massive arrears;
    • the payroll is still invaded by ghost workers, just now 20.000 ghost workers have been identified, and will be dealt with; meetings with the bank associations have been scheduled to arrest culprits at the time of withdrawing money. Some stringent measures have already been undertaken: all employees need to have a valid National ID, otherwise they will not be included in the payroll;
    • Oversight of parastatals is paramount, as they currently borrow without due regard to their capacity to service the loans and with the expectation that ultimately the treasury will cover any defaults.
    • Similarly it will be important to increase tax compliance to widen the tax base.
    • The Minister concluded with "we want to do whatever it takes" to improve the performance of PFM and put the provided resource to proper use.

The programme kicked off with an IMF agreement to strengthen core tax administration functions. A first mission took place in December 2019, highlighting the challenges to be addressed over the coming years. Overall the IMF confirmed the good potential for The Malawi Revenue Authority (MRA) to increase collection capacity, but stressed the need for a strong operational platform i.e. an Integrated Tax Administration System (ITAS) to increase efficiency. Among others enforcement is weak and processes have to be reengineered. Tax audits are not effective. And the tax registry is still in a bad state and continuous cleaning efforts are needed.

Simultaneously in December 2019 the four long terms experts embedded within the Ministry of Finance and its agencies commenced work. They are focusing on revenue policy, internal controls, procurement and contract management as well as increased oversight of state owned enterprises.

Three grant contracts have been signed to support civil society organisations to gather evidence to demand accountability from duty bearers, and generate policy-oriented research to provide evidence for decision making.

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