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Budgetary Theatre

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

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Budgetary Theatre

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  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) 1994-1999, 1999-2004 • 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. FORMAL INSTITUTIONS Laws Budget Constraints Intl Agreements Figure 1: The Political Economy of the Budget in Malawi Pro-Poor/ Consistent Anti-Poor/ Consistent Stages Planning Formulation Passage Implementation Oversight ACTORS Public Civil society Donors Pro-Poor/ Inconsistent Anti-Poor/ Inconsistent INFORMAL INSTITUTIONS Patronage Networks Region, Kin, ethnic Religious

  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 • President’s 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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