PUBLIC FINANCE MANAGEMENT INSTITUTIONAL SUPPORT PROJECT-PHASE TWO (PFMISP II)


Overview

  • Reference: P-MW-KF0-003
  • Approval date: 10/09/2015
  • Start date: 02/12/2015
  • Appraisal Date: 02/02/2015
  • Status: OngoingOnGo
  • Implementing Agency: MINISTRY OF FINANCE
  • Location: Malawi

Description

The project is designed to strengthen capacity in revenue administration, and enhance transparency, compliance, and control in use of public resources in Malawi. It has two major components, namely:

(i) strengthening capacity in revenue administration; and

(ii) enhancing transparency, compliance, and control in use of public resources.

The expected programme outcomes include an (a) strengthened capacity in revenue administration, and (b) Enhanced transparency, compliance, and control in use of public resources[as measured by improved Public Expenditure and Financial Accountability (PEFA) scores on tax collection, procurement and internal controls]. The overall impact of the project will be reflected in improved mobilization and use of public resources leading to better service delivery.


Rationale

The project is aligned to the improved governance and cross-cutting themes of the MGDS II (2011 -16). MGDS II recognizes that improving quality of public finances can contribute to increasing growth and that sound PFM systems are critical to effective public spending and increased revenue mobilisation. Pillar II of the CSP identifies PFM institutional support as an instrument for strengthening PFM systems and improving the business environment. The CSP has singled out Bank support to PFM reforms with emphasis on strengthening revenue administration, and promoting transparency in public procurement. Through improved tax administration and procurement systems, corruption will be reduced and competition will be enhanced, hence improving the business environment. By focusing on PFM reform, the proposed operation is aligned to the Bank's Long Term Strategy and Operational Priorities (good governance and inclusive growth) as well as Pillar I (Public Sector and Economic Management) of Governance Strategic Framework and Action Plan (GAP II, 2014-2018) that seek to build effective and capable institutions and promote transparency and accountability to enhance the quality of growth. The operation will further contribute to the GoM's implementation of the National Gender Policy, which provides for incorporating capacity building for gender mainstreaming, and women economic empowerment.

The proposed project is complemental to the on-going PFMISP that seeks to address the existing capacity weaknesses and help to address financial management challenges experienced in Bank-financed projects. Through the PFMISP II, the Fund is supporting the implementation of the PFM Action Plan that has been designed to address bottlenecks and shortcomings that led to the cash-gate by focussing on strengthening of oversight, compliance and control mechanisms in use of public resources. Improved oversight, compliance and controls will lead to improved PFM environment which, in turn, will lead to increased mobilisation and effective use of resources. Further DPs will gain trust and confidence in use of country systems as a result and this will lead to promotion of the Paris Declaration principles. The operation will also strengthen the Bank Group's position in dialoguing with GoM beyond resource mobilisation and public procurement. The GoM in putting in place necessary policy and institutional framework to improve PFM; however, developing and sustaining human capital remains a great challenge. The PFM situation analysis report highlights the need for capacity development both in terms of human and organisational development. The GoM recognizes that weak capacity is hampering the pace of reforms, and hence designed a PFEMRP, PSRP and the PFM Action Plan with a view to address the challenges. In this regard, the proposed operation will continue supporting reform priorities that are critical for effective implementation of the MGDS II.


Benefits

The main project beneficiary institutions are the Malawi Revenue Authority, Office of the Director of Public Procurement (ODPP), the Malawi Institute of Procurement and Supply (MIPS), the National Audit Office (NAO), the Central Internal Audit Unit (CIAU), and Ministry of Finance (PFEM Division). The citizenry will also benefit from an improved service delivery arising from the project. The programme will improve gender outcomes in areas of human resource development. Modalities for ensuring gender mainstreaming will be established during appraisal. Women will be given a better chance of being included in activities such as training. The programme will directly contribute to improved economic and financial governance in Malawi through improved capacity in public resource mobilisation, management and oversight, and reduced corruption. The project will result in improved tax administration, efficient and transparent procurement systems, improved controls and oversight.


Key contacts

KAMANGA Fenwick Dingiswayo - OSGE2


Costs

Finance source Amount
ADFUAC 1,860,000
TotalUAC 1,860,000