Projects > Brief descriptions > Provision of Macroeconomic Advice to the Ministry of Economic Planning and Development and the Ministry of Finance

Contact person

For further information please contact:
Dr Florian Lang
Email: florian.lang@giz.de

Provision of Macroeconomic Advice to the Ministry of Economic Planning and Development and the Ministry of Finance

Programme description

Title: Provision of macroeconomic advice to the Ministry of Economic Planning and Development and the Ministry of Finance
Commissioned by: German Federal Ministry of Economic Cooperation and Development (BMZ)
Country: Malawi
Lead executing agency: Ministry of Economic Planning and Development (MEPD); Ministry of Finance (MoF)
Overall term: 2004 to 2014

Context

With an average annual per-capita income of US$ 180 in 2008, Malawi is among the world’s poorest countries. Approximately 65 per cent of the population lives below the poverty line. The UNDP Human Development Index (HDI) ranks Malawi in 162nd place out of 179 listed countries.

The government is showing its willingness to make its policies pro-poor and to reform the public finance system. One of the most important challenges is to effectively implement the Malawi Growth and Development Strategy (MGDS) and to integrate it into the national budget. Major issues to be tackled here relate to the competence and ability to prioritise, plan and manage reforms, monitor results, facilitate coordination among the most important government actors, and consult with all concerned and involved, ensuring transparency towards them.

Objective

The Malawi Growth and Development Strategy is being better implemented via the national budget.

Approach

The project supports the government in planning, coordinating and implementing the reform of public finances, in implementing and monitoring the Malawi Growth and Development Strategy and effectively linking it with the national budget. Success will depend on establishing a network that involves the competent Ministries, the Ministry of Finance (MoF) and the Ministry of Economic Planning and Development (MEPD), and integrates the development and budget planning processes.

Results achieved so far

The project contributed to the development of the second poverty reduction strategy (MGDS 2006-2011) which the Malawian government adopted in mid-2006. Now the project is supporting the Ministry of Economic Planning and Development in monitoring its implementation. To this end, a Monitoring and Evaluation (M+E) Master Plan has been drawn up; it contains guidelines for monitoring and evaluating the poverty reduction strategy.

In order to implement the Master Plan, a number of donors joined forces with the Ministry to set up a support programme, a further investment in capacity development. This resulted in a clear improvement in the monitoring process. The second report on the implementation status of the poverty reduction strategy (for 2008) was completed significantly earlier than the first (for 2007), enabling the results to be included in the budget planning.

In 2006, the project supported the Ministry of Finance in drawing up an action plan for the reform of public finances. This document contained all the reform projects for three years: the projects agreed with donors within the context of budget aid and individual programmes and independent activities instigated by the Government. The project also played a central role in developing the follow-up plan, which was presented in June; thus the project is having advisory input at a key strategic position.

The implementation of the first action plan led to improvements in economic management and public finances. Thus, a budget calendar has been introduced and the budget memorandum improved; both have been in use since the 2007/2008 budget was drawn up. These are fundamental elements of an orderly, efficient planning process in the Ministries and thus play a key role in the improved integration of the MGDS objectives into the national budget.

The project is supporting the introduction of a Poverty and Social Impact Analysis (PSIA). As an instrument for analysing policy and social impact, it also examines the distribution effects of the reforms. The analysis of a water supply privatisation concept (Private Sector Participation in the Distribution and Management of Water Services in the Low Income Areas of Blantyre and Lilongwe) was completed in March 2007. Among other things, it highlights the risks involved for impoverished sectors of the population and their access to water if the management of water supply facilities were to be fully privatised. This element of the privatisation concept was rejected as a result. The positive experience of PSIA has led the Ministry of Economic Planning and Development to consider institutionalising this instrument.