Councils grapple with budget deficits, funding delays

Local government authorities are persistently having budget deficits and encountering funding delays, with fresh information showing, among others, that the councils only received MK34.47 billion from an expected MK42.5 billion in the second quarter (July-September) of the 2024/2025 financial year.

Funding especially for September delayed exceedingly by two months, resulting in operational challenges, including affecting road deliveries, among other sectors.

This is contained in an analysis of fiscal space of local authorities for the second quarter conducted by Malawi Local Government Association (MALGA), an umbrella body of all local councils.

According to the analysis, local government authorities receive their funding through Central Government Transfers (CGTs), Locally Generated Revenues (LGRs) and Other Recurrent Transactions (ORTs), among other National Government (NG) financing.

The analysis, for instance, says the councils total expected income through CGTs was MK32.5 billion for the second quarter, representing 76% of expected funding to be transferred from the Central Government.

However, according to the analysis, worth noting is that during the period under review, the local authorities did not receive funding for the month of September, which delayed by two months.

“In terms of Central Government Transfers that was not received in September, city roads sector failed to access MK2.69 billion, representing 27% of funds not transferred.

“Resources for the city roads trickled at 40% of the expected MK4.48 billion. This cash-flow challenges will likely affect the progress of the road projects in the cities, municipal and peri–urban councils.

“However, health ORT, hospital rehabilitation funds as well as education ORT did receive MK1.5 billion, MK1.79 billion and MK1.25 respectively during the second quarter of this financial year”.

According to the analysis, during the period under review, all local authorities had received ORT funding for the months of July and August but not for the month of September 2024.

“Resultantly, the LGAs faced operational challenges in the month of September considering the small fiscal space from Locally Generated Revenues for operational and development activities,” reads in part the analysis, adding that, as of 18^th November, the councils were yet to receive funding for the months of September, October and November from the Treasury.

MALGA did the analysis as part of its routine work in executing its mandate on policy advocacy.

The findings of the analysis informs the association’s policy advocacy on budget advocacy, said Hadrod Zeru Mkandawire, MALGA Executive Director.

The analysis further states that the second fiscal spaces for local governments in Malawi have been very tight, resulting in less than expected Central Government Transfers.

“The inconsistency between policy and action continues to be a defining feature of fiscal devolution which continues to undermine the huge potential the councils have in contributing towards the realization of Malawi 2063”.

“Much as we commend the Government for laying out bold and ambitious policy statements in the new edition of Decentralization Policy 2024, which, if followed through, would transform the LGAs fiscal position, we remind the Government that policy statements without meaningful action remain dead ideas”.

Its high time the Government matches policy and action on fiscal devolution, the analysis adds.

Currently, there are 35 local authorities in Malawi, comprising 28 district councils, four city councils and three municipal councils.

In the current financial year, the total budget estimates for the LGAs is pegged at MK183 billion of which MK141 billion is expected to be Central Government Transfers (CGTs) and MK42 billion from Locally Generated Revenues (LGR).

According to the analysis, the total budget does not include financial resources for projects and programme activities from development partners.

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