Financially struggling local councils are set to lose about K25 billion in performance-based grants under Governance to Enable Service Delivery (Gesd) because they failed to fully utilise the resources.
The turn of events prompted Gesd to revise downwards its $25 million (about K42 billion) allocation to about $10 million (about K17 billion) from this year.
National Local Government Finance Committee (NLGFC) and the Ministry of Local Government, National Unity and Culture have confirmed that there was delay in utilisation and completion of projects by local authorities.
This means councils will have to revise their budgets for development projects which Gesd funds are mostly used for to reflect the reduction.
Santhe: They must revise their budgets
In a communication to all local councils on Wednesday, NLGFC chief executive officer Kondwani Santhe said the councils will have to present the revised budgets to his office by today, February 9.
Reads the letter: “I am writing to advise on the revised indicative planning figures for [Gesd] for 2024/25 financial year. The initial ceilings for performance based grant [PBG] 4 were based on $25 million [K42 billion] PGB pool which has now been revised downwards to $10 million [K17 billion].
“This comes as a result of delayed disbursement of PBG 3 funds. The delay in roll out of PBG 3 funds is expected to impact PBG 4 in terms of absorption since the two PBGs will have an overlapping implementation period.”
Reacting to the development, Rodney Simwaka, who chairs Malawi Local Government Association (Malga) Managers Network a network comprising district commissioners and chief executive officers of local councils, said the reduction will negatively affect council projects.
He said: “Our projections in terms of development will be affected, but all in all, we are taking a cautious move that meets the demands of donors. On the delay, we were required to do a number of steps before we access the money.”
In a written response, Ministry of Local Government, Unity and Culture Principal Secretary James Chiusiwa said the Gesd project disburses performance-based grants to qualifying local authorities using the local authority performance assessment results.
He said the project noted that local authorities implemented infrastructure projects with funds from performance-based grant cycle 1 (2021/22) up until mid of 2022/23 financial year (FY) and that they continued to implement projects with funds from cycle 2 (2022/23) up to around November 2023 which is third quarter of 2023/24 financial year.
“Cycle 3 funds were, therefore, disbursed in the fourth quarter of 2023/2024 financial year. Essentially, local authorities still have 60 percent of the cycle 3 funds. Disbursement of 40 percent is conditioned on the utilisation of 60 percent of the cycle 3.
“This means that 40 percent of the funds will be made available to local authorities deep into 2024/25 FY. The disbursement of funds to the local authorities, apart from relying on the results on the local authority performance assessment, is dependent on full utilisation of the funds available to the local authorities.”
The Gesd project development objective is to strengthen core national and local government institutions to improve their efficiency.