Local government authorities (LAs) continue to struggle to receive thresholds of their funding through Central Government Transfers (CGTs), Locally Generated Revenues (LGRs) and Other Recurrent Transactions (ORTs), among other National Government (NG) financing.
LAs do not even receive any funding in some months, shows an analysis of fiscal space of LAs for the first quarter (April-June) of the 2024/2025 financial year, which Malawi Local Government Association (MALGA) conducted.
But the Ministry of Finance and Economic Affairs says government's funding "is based on cash flow".
The MALGA analysis says the low and inconsistent funding results in cash flow challenges in delivery of public services by local governments.
It reads in part: "During the first quarter of this fiscal year, the LAs total income from the National Government and Locally Generated Revenues amounts to MK35.9 billion which is 20% of their annual budget.
"The LAs received transfers from NG amounting to MK26.9 billion from expected funding of MK37 billion for the quarter, representing 73%.
"The LAs collected MK8.9 billion of LGR from the expected MK10.5 billion, representing 85%".
On ORT, the LAs which were expecting to receive MK17 billon, only received MK10.7 billion, with a negative variance of MK6.3 billion.
According to the analysis, all LAs had received ORT funding for the months of April and May but not for June, meaning that the LAs "faced a lot of challenges to maneuver the small fiscal space from LGR for operational activities".
On development funding, MALGA says all the District Councils received in April and May as planned while all the Urban Councils have negative variances.
"In the month of June, 2024, all LAs did not receive any development funding even at the time of writing this report by Mid July, 2024.
"This lack of funding has resulted in cash flow challenges in delivery of public services including education, health and agriculture".
MALGA, an umbrella body of all local governments in Malawi, did the analysis as part of its routine work in executing its mandate on policy advocacy.
Hadrod Zeru Mkandawire, MALGA Executive Director, said the findings of the analysis "informs the association's policy advocacy on budget advocacy".
Weighing in on the analysis, Williams Banda, Ministry of Finance and Economic Affairs spokesperson, said government's funding "is based on cash flow".
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"A national budget is a plan and funding is done based on cash flow. In this regard, macroeconomic shocks determine the resource disbursement".
In 2024-2025, the total budget for the LAs is pegged at MK183 billion, comprising MK141 billion from CGTs and MK42 billion from LGRs. This does not include financial resources for project and programme activities from development partners, according to the analysis.
The revised National Decentralization Policy clarifies that 5 percent of Net National Revenues should be transferred to LAs for local development purposes.
However, according to MALGA, intergovernmental fiscal transfers are, currently, at about 1% of Net National Revenues, which falls far short of the legislative threshold.
MALGA has, therefore, reiterated its call for fiscal autonomy of Local Government Authorities as envisaged by the Constitution, Local Government Act and Decentralization Policy.
"We, therefore, reiterate our persistent and long call for the Central Government to adhere to the provisions of the Decentralization Policy which, among others, provide that the Government shall share ceded revenue with Local Government Authorities.
"In addition, the Central Government should consider making policy shift on local taxes by leaving some taxes to Local Government Authorities, which, would enhance the sources of revenue for the Local Government Authorities," the analysis concludes.
