Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Africa Region Reduction andEconomicManagement4 Poverty 2013 November Public ExpenditureReview Malawi Document of the World Bank World Document ofthe Report No.79865-MW MALAWI – GOVERNMENT FISCAL YEAR JULY 1 – JUNE 30 CURRENCY EQUIVALENTS (EXCHANGE RATE EFFECTIVE AS OF OCTOBER 22, 2013) CURRENCY UNIT = MALAWI KWACHA (MWK) MWK 366 = US $1 US$1.0 = SDR 0.65 WEIGHTS AND MEASURES METRIC SYSTEM ABREVIATIONS AND ACRONYMS AICD Africa Infrastructure Country Diagnostic ADT Average Daily Traffic BPFP Budget Policy Framework Paper CABS Common Approach to Budget Support CAADP Comprehensive Africa Agriculture Development Program CAS Country Assistance Strategy CBE Continued Basic Education CBET Competency-Based Testing CBO Community-Based Organization CDSS Community Day Secondary School CEAR Central and East Africa Railways CEM Country Economic Memorandum CGIAR Consultative Group on International Agriculture Research CHAI Clinton Health Access Initative CHAM Christian Health Association of Malawi CIAT International Center for Tropical Agriculture CML Central Materials Laboratory COMSIP Community Savings and Investment Promotion CSR Country Status Report DAD Debt and Aid Division DCA Department of Civil Aviation DEM District Education Manager DFID Department for International Development DP Development Partner DSB Department of Statutory Bodies DSS Direct Support to Schools ECD Early Childhood Development ECF Extended Credit Facility EDM Education Division Management EFA Education for All EHP Essential Health Package EIMU Education Infrastructure Management Unit EMIS Education Management Information System ERP Economic Recovery Plan ESIP Education Sector Implementation Plan EU European Union FISP Farm Input Subsidy Program FROIP Financial Reporting and Oversight Project FY Fiscal Year GDP Gross Domestic Product GOM Government of Malawi GPE Global Partnership for Education HIPC Highly Indebted Poor Countries HR Human Resources HRH Human Resources for Health HRMIS Human Resource Management Information System HSSP Health Sector Strategic Plan ICAO International Civil Aviation Organization ICRISAT International Crops Research Institute for the Semi-Arid Tropics IEC Internal Efficiency Coefficient IFMIS Integrated Financial Management Information System IITA International Institute of Tropical Agriculture IHS Integrated Household Survey IHS3 Third Integrated Household Survey IPTE Initial Primary Teacher Education IT Information Technology IWT Inland Water Transport JFA Joint Financing Arrangement JICA Japan International Cooperation Agency KIA Kamuzu International Airport LDF Local Development Fund LGC Local Government and Councils LVSR Low Volume Sealed Road M&E Monitoring and Evaluation MASAF Malawi Social Action Fund MDAs Ministries, Departments, and Agencies MDG Millennium Development Goal MDRI Multilateral Debt Relief Initiative MEPD Ministry of Economic Planning and Development MGDS Malawi Growth and Development Strategy MGWCD Ministry of Gender, Women and Child Development MK Malawi Kwacha MLGRD Ministry of Local Government and Rural Development MoAFS Ministry of Agriculture and Food Security MoEST Ministry of Education, Science and Technology MoE Ministry of Disabilities and Elderly MoF Ministry of Finance MoGCSW Ministry of Gender, Children, and Social Welfare MoH Ministry of Health MSCE Malawi School Certificate of Education MTEF Medium Term Expenditure Framework MTFF Medium Term Fiscal Framework MTPW Ministry of Transport and Public Works MUST Malawi University of Science and Technology MZUNI Mzuzu University NHA Malawi National Health Accounts NAO National Audit Office NESP National Education Sector Plan NGO Non-governmental Organization NLGFC National Local Government Finance Committee NOCMA National Oil Company of Malawi NSSP National Social Support Program OBS Open Budget Survey ODL Open and Distance Learning OPC Office of the President and Cabinet ORT Other Recurrent Transactions PCR Pupil-Classroom Ratio PE Personal Emoluments PEA Primary Education Advisor PEFA Public Expenditure and Financial Accountability Framework Assessement PER Public Expenditures Review PFEM Public Finance and Economic Management PFEMRP Public Financial and Economic Management Reform Program PFM Public Financial Management PHC Primary Health Care POW Program of Works PPP Public-Private Partnership PQTR Pupil-Qualified Teacher Ratio PRC People's Republic of China PSIP Primary School Improvement Program PTR Pupil-Teacher Ratio PVHO Plant and Vehicle Hire Organisation R2 Coefficient of Determination RA Roads Authority RBM Reserve Bank of Malawi RFA Road Fund Administration RSP Road Sector Programme SACMEQ Southern African Consortium of Monitoring Education Quality SADC Southern African Development Community SCTP Malawi Social Cash Transfer Program SDI Malawi Staff Development Institute SMEs Small and Medium Size Enterprises SOEs State-Owned Enterprises SSA Sub-Saharan Africa SP Social Protection SWAp Sector-Wide Approach TBs Treasury Bills TEVET Technical, Entrepreneurial and Vocational Training TEVETA Technical, Entrepreneurial and Vocational Training Authority THE Total Health Expenditures TLM Teaching and Learning Materials TSIP Transport Sector Investment Programme TRANSRA Transport Regulatory Authority TTC Teacher Training College TWG Technical Working Group UNESCO United Nations Educational, Scientific and Cultural Organisation UNIMA University of Malawi WDI World Development Indicators Vice President : Makhtar Diop Country Director : Kundhavi Kadiresan Sector Director : Marcelo Giugale Sector Manager : John Panzer Task Team Leader : Tuan Minh Le TABLE OF CONTENTS EXECUTIVE SUMMARY ......................................................................................................................... i Chapter 1. Macroeconomic Developments and Public Expenditure Framework.......................... 1 1.1 Introduction ................................................................................................................................... 1 1.2 Macroeconomic Trends................................................................................................................. 1 1.3 Structure of the Budget and Fiscal Trends .................................................................................... 4 1.4 The Fiscal Framework (2012/13 - 2015/16) ................................................................................. 7 1.5 Restraining Expenditures Through Cross Sectoral Policies ........................................................ 10 Chapter 2. Strengthening Planning and Budgeting Processes ....................................................... 17 2.1 Introduction ................................................................................................................................. 17 2.2 Progress with Planning and Budgeting Reforms ........................................................................ 17 2.3 Advancing the MTEF Reform .................................................................................................... 20 2.4 Strengthening Management of the planning and Budgeting Process .......................................... 29 Chapter 3. Agriculture ...................................................................................................................... 35 3.1 Introduction ................................................................................................................................. 35 3.2 Assessment of Agriculture Expenditures .................................................................................... 35 3.3. Agriculture Sector Performance and Key Issues ........................................................................ 47 3.4 Policy Priorities or Suggestions for Reform ............................................................................... 52 Chapter 4. Transport ......................................................................................................................... 55 4.1 Introduction ................................................................................................................................. 55 4.2 Assessment of Transport Expenditures ....................................................................................... 55 Chapter 5. Education ......................................................................................................................... 74 5.1 Introduction ................................................................................................................................. 74 5.2 Assessment of Education Expenditures ...................................................................................... 74 5.3 Education Sector Performance and Key Issues ........................................................................... 83 Chapter 6. Health ............................................................................................................................... 90 6.1 Introduction ................................................................................................................................. 90 6.2 Assessment of Health Expenditures ............................................................................................ 90 6.3 Health Sector Performance and Key Issues .............................................................................. 104 Chapter 7. Social Protection ..........................................................................................................