Apart from providing financial resources, the World Bank supports Malawi with its knowledge and technical expertise. One key area in which the Bank provides technical assistance to the Malawi government is the review of its public expenditures.
The latest expenditure review report – the 2006 Public Expenditure Review (PER) – was released in October 2007. The purpose of the PER is to guide the government in implementing reforms needed to reestablish fiscal sustainability, create stable macro-economic conditions, and make better use of scarce resources.
“It is government’s sincere hope that the PER will improve expenditure control and monitoring and ensure efficient utilization of resources, which is a necessary building block for poverty reduction and economic growth,” according to Randson Mwadiwa, secretary to the treasury in the Ministry of Finance, the government office that coordinated the PER.
“The 2006 PER has been a major undertaking by government, he continued. “It represents a thorough investigation of public expenditure trends and utilization in government, focusing on Education, Health, Nutrition and Roads.”
The 2006 PER observes that Malawi is making good progress in macro-economic stabilization which has resulted in, among other things, a lower interest bill. The reduction in interest payments is generating fiscal space that can be channeled to priority expenditures. Among these priority expenditures is transport infrastructure such as roads.
On reviewing expenditure trends in the road sector, the PER notes a decline as a percentage of GDP since 1999/00 and an increase since 2005/06. It notes that the share devoted to maintenance has decreased steadily, while expenditure on upgrading and construction of new roads has increased substantially, both as a share of roads expenditure and as a percentage of GDP. In the last three years, about 60 percent of road expenditures has gone to new construction.
Key PER Findings and Recommendations on Roads
1. Poor road maintenance
The first finding is that funding for road maintenance has been inadequate. The PER therefore recommends that the government should ensure that funding for routine maintenance is adequate and consistent.
Full maintenance and rehabilitation costs of Malawi’s road network is estimated at US$50million per year. The Road Fund, mainly resourced through the fuel levy, cannot cover this cost. The PER therefore recommends a gradual increase of the fuel levy from the current US7 cents per liter to up to16.5 cents over time. The PER, however, stresses that a poverty and social impact analysis of such an increase should be carried out before increasing the levy.
2. Unsystematic road planning, maintenance and construction
The second finding is that there is no system for planning and prioritization in road maintenance and construction activities. Decisions on road maintenance and construction have been made without any clear criteria or method of analysis. It observes there is political interference on deciding which roads should be worked on, and decisions are made without thorough project analysis and appraisal. And, although the Ministry of Transport and Public Works has developed a Road Data Manager (RDM), which is a state-of-the-art system to guide the use of public expenditures in road maintenance and construction, the RDM is not yet used to guide decisions.
The PER therefore recommends use of the RDM to assist in prioritization and efficient allocation of funds. The adoption of the RDM is important for Malawi since the government is planning to expand expenditures on roads. In the Malawi Growth and Development Strategy (2006-2011) transport infrastructure development is a key priority area. The World Bank and the European Union are Malawi’s main development partners in improving infrastructure.
3. Less attention is paid to rural roads
The PER also highlights that while the country’s main roads are mostly in very good condition, as much as 74 percent of Malawi’s road network is unpaved and mostly in poor condition. In fact, roads in rural areas are often impassable for up to four months in a year.
The PER recommends that the imbalance of finance between rural and main roads should be addressed. The formula for allocating maintenance resources between the paved and unpaved network should be revised in favor of the unpaved network.
In an effort to do this, the World Bank is supporting Malawi in improving the paved network in rural areas through the US$40 million Infrastructure Services Project (2006-2011). Part of the infrastructure consists of road networks in five corridors key to strengthening economic growth in rural areas.
4. Week capacity of domestic construction industry
The National Roads Authority estimates that about US$500 million would be required in the next five years to bring 70 percent of the country’s road network to a good standard. This requires about 11,000 km of roads to be rehabilitated.
Although there are many local contractors registered as road constructors, their capacity is still limited to absorb the work ahead. The PER recommends that the local contracting capacity be strengthened by, among other ways, expanding duration and coverage of the routine maintenance contracts in order to provide firms a more stable income stream. This would allow an increase in investments and capacity. The PER also recommends maintaining preferential treatment in public works tender for foreign companies that go into a joint venture with a local company, to facilitate know-how transfer.
The Malawi government has already started implementing some of the recommendations, and Hon. Goodall Gondwe, minister of Finance, has established a team to draw a strategy to implement outstanding recommendations.
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