Finance Minister Felix Mlusu says the Tonse Alliance administration has resolved to consolidate multiple bank accounts operated by their ministries, departments and agencies and keep their revenues in Treasury Single Account each as part of efforts to curb abuse of public funds.
Delivering a budget statement for 2020/21 in Parliament on Friday, the Treasury Czar said government has numerous bank accounts which are difficult to manage which affects precision of Government cash position at any given point in time.
He said such a structure is costly due to numerous bank charges incurred on the accounts.
Mlusu announced that in the 2020/2021 fiscal year, government will establish a Treasury Single Account to ensure proper oversight of government cash flows and to reduce the cost of keeping public money in several commercial banks.
Explained Mlusu: “This, Madam Speaker, does not necessarily mean having one bank account, but it is rather a unified structure of bank accounts where Government resources are pooled and treated as fungible.
“A Treasury Single Account would provide a consolidated cash position with a clear overview of all cash flows in and out of the accounts.”
The minister said if a country has a fragmented system for handling government receipts and payments through the banking system, it is a critical Public Finance Management weakness that needs to be addressed.
“A country with fragmented government banking arrangements pays for its institutional deficiencies in multiple ways. Firstly, Madam Speaker, idle cash balances in bank accounts often fail to earn market related remuneration.
“Secondly, Government, being unaware of these resources, incurs unnecessary borrowing costs on raising funds to cover a perceived cash shortage. Thirdly, idle government cash balances in the commercial banking sector are not idle for the banks themselves, and can be used to extend credit, including to Government itself. Draining this extra liquidity through open market operations also imposes costs on the central bank,” he said.
Mlusu also reported to Parliament that as part of strengthening Public Finance Management Systems, the government through the Department of Accountant General rolled out the new Integrated Financial Management and Information System (Ifmis) on 1st July, 2020.
The new Ifmis replaces the old version of the software Epicor 7.3, which was due for upgrading since it was installed in 2005.
“The roll out has been done in a phased approach where 10 selected votes and modules were identified as part of the pilot phase,” said Mlusu.
He said the neww IFMIS is a key reform in Public Finance Management and pivotal to the efficient and effective accounting and financial reporting functions in Government.
“ Its full rollout is expected to be done by 1st July, 2021,” said Mlusu
Findings by British forensic auditors Baker Tilly in 2013, established that the old Ifmis was grossly abused, especially by lower management accountants in the civil service, resulting in the plunder of K23 billion.
The Malawi Government has spent about K5 billion on the new Ifmis whose supplier is Twenty Third Century Systems, which also works in Zimbabwe, Zambia, South Africa, Mozambique, Tanzania, Kenya, Uganda, Rwanda and Nigeria.
The system also introduces the automation of employee loan management that will enable recording and management of loans, which is currently done manually and that every month after deductions are effected, the loan record will be updated automatically.
Mlusu presented his first substantial budget that has been developed under the theme “Living The Promise” during the 49th meeting of first session of parliament.
This projected total expenditure for the coming fiscal year is about 30.6 percent of the country’s Growth domestic Product (GDP) and representing an increase of around 22.9 percent from the 2019/2020 preliminary expenditure outturn.
He said the K2.190 trillion budget focuses on achievement of sustainable and inclusive growth, macroeconomic stability and sound financial management.Follow and Subscribe Nyasa TV :