CMI REPORT
BUDGET, STATE AND PEOPLE
R 2007: 7
From the process of planning and formulating the budget, through its implementation and oversight, our study finds that the budget process in Malawi provides no realistic estimate of revenue or spending. Simply put, the budget process is a theatre that masks the real distribution and spending. This comes as no surprise to any of the stakeholders in the process; all the actors, from civil society, government, and donors seem aware that many of their statements and actions have little bearing on actual distribution of resources and that actual implementation is different from stated intentions (Rakner, Mukubvu et al. 2004:4). A somewhat similar observation is made for Angola by CEAST: Although the law speaks of universality, the reality in Angola is another. Two budgets exist: a virtual budget presented to the members of the assembly for analysis, and the other real budget that is executed by the Presidency of the Republic. The real budget in many cases has nothing to do with the virtual budget which the parliamentarians deal with (2006:15). The World Bank (2005:i) notes a duality in the budget system, pointing out that Angola has two parallel public finance (PFM) systems. A conventional PFM system exists under the Ministry of Finance, and an unconventional system is run by Sonangol and the BNA. The latter, described in more detail below, finances various types of development expenditure, subsidises petroleum products and undertakes external debt operations which obscure and confuse the lines between government and Sonangol / BNA and has been much criticised by the Bank and the Fund as ‘quasifiscal operations’. Despite the IFI’s continuous pressure for a merger of the two systems, a definitive inclusion of Sonangol’s roles in the conventional budget has not yet taken place. Progress has been made by reflecting Sonangol operations in the budget but the quasi-fiscal operations have not been phased out (World Bank 2006:xviii). Deficiencies in the system have real effects. It has been noted that more than 20 percent of the executed budget went into the unspecified category of general public spending in 2005. The true amount of public resources in danger of being lost because of the quasi-fiscal operations is not publicly known. The impact of the budget on poverty reduction and employment generation is likely to be low given the tendency to favour large construction projects rather than investment in labour-intensive sectors. The share of public expenditure spent on social sectors such as health and education has also declined since 2000, despite government intentions to the opposite (Bjørnestad 2007:16). Popular discourse confirmed by officially exposed cases of corruption indicates strongly the deviations between budget and reality in terms of misallocation and in terms of grand and petty corruption activities inside the conventional system. It is therefore very important to analyse the system that does the job of budget execution, which we do below. Box 3 below explains some important organisations and concepts in Angolan budget execution.
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