Malawi - The Third Fiscal Restructuring and Deregulation Program Project and the Third Fiscal Restructuring and Deregulation Program Technical Assistance Project (FRDP III)

Document of The World Bank FOR OFFICIAL USE ONLY Report No. P 7419 MAI REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON PROPOSED CREDITS TO THE REPUBLIC OF MALAWI IN THE AMOUNT OF SDR 43.5 MILLION (OF WHICH SDR 0.4 MILLION HAVE BEEN ALLOCATED FROM IDA REFLOWS) FOR THE THIRD FISCAL RESTRUCTURING AND DEREGULATION PROGRAM AND IN THE AMOUNT OF SDR 2.4 MILLION FOR THE THIRD FISCAL RESTRUCTURING AND DEREGULATION PROGRAM TECHNICAL ASSISTANCE PROJECT November 27, 2000 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS (Exchange Rate Effective October 25, 2000) Currency Unit = Malawi Kwacha (MK) MK1 = US$ 0.0125 US$ 1 = MK80 SDR 1 = US$1.279 MEASURES Metric System FISCAL YEAR July 1 to June 30 (as of July 1998) Vice President: Callisto E. Madavo Country Director: Darius Mans Sector Manager: Philippe H. Le Houerou Task Team Leader: Sudhir Chitale  GLOSSARY OF ACRONYMS ADMARC Agricultural Development and Marketing Corporation BHA Better Health for Africa BOP Balance of Payments CAS Country Assistance Strategy CBM Commercial Bank of Malawi CMS Central Medical Stores COMESA Common Market for Eastern and Southern Africa ESAF Enhanced Structural Adjustment Facility ESCOM Electricity Supply Corporation of Malawi FRDP Fiscal Restructuring and Deregulation Program GDP Gross Domestic Product GOM Government of Malawi HIPC Highly Indebted Poor Countries IBRD International Bank for Reconstruction and Development IDA International Development Agency IDF Institutional Development Fund IFMIS Integrated Financial Management Information System IMF International Monetary Fund IPC International Procurement Consultants I-PRSP Interim Poverty Reduction Strategy Paper LDP Letter of Development Policy MASAF Malawi Social Action Fund MDC Malawi Development Corporation MHC Malawi Housing Corporation MK Malawi Kwacha MOF Ministry of Finance MPC Malawi Posts Corporation MPTC Malawi Posts and Telecommunications Corporation MRA Malawi Revenue Authority MTs Metric Tons MTEF Medium-Term Expenditure Framework MTL Malawi Telecommunications Limited NEC National Economic Council NFRA National Food Reserve Agency NSNS National Safety Net Strategy OED Operations Evaluation Department ORT Other Recurrent Transactions PAR Project Audit Report PCC Petroleum Control Commission PCR Project Completion Report PER Public Expenditure Review PFP Policy Framework Paper PRGF Poverty Reduction and Growth Facility PRSP Poverty Reduction Strategy Paper PSD Private Sector Development RBM Reserve Bank of Malawi SDR Special Drawing Rights SNIC Safety Net Implementation Committee SPA Special Program of Assistance to Low-income Debt Distressed Countries in Sub-Saharan Africa  TA Technical Assistance TIP Targeted Input Program TOR Terms of Reference VAT Value Added Tax  MALAWI THIRD FISCAL RESTRUCTURING AND DEREGULATION PROGRAM AND FRDP III TECHNICAL ASSISTANCE Table of Contents 1. INTRODUCTION .............................................................. 1 2. BACKGROUND AND RECENT ECONOMIC DEVELOPMENTS .................. 1 3. THE GOVERNMENT'S REFORM PROGRAM - THE FRAMEWORK ........... 4 4. POLICY REFORMS SUPPORTED BY THE PROPOSED CREDIT .................. 6 A. Public Sector Management .............................................................. 7 B. Private Sector Development Reforms ...................................................... 10 C. Safety Nets Strategy .............................................................. 13 5. MACROECONOMIC PROSPECTS, EXTERNAL DEBT AND FINANCIAL REQUIREMENTS .............................................................. 14 6. RELATIONSHIP TO THE CAS AND DESIGN OF THE CREDIT ........ ........... 16 7. BENEFITS AND RISKS .............................................................. 18 8. CONCLUSION .............................................................. 19 TABLES TABLE 1: KEY ECONOMIC INDICATORS. 2 TABLE 2: TRACK RECORD OF STRUCTURAL REFORMS. 3 TABLE 3: EXCEPTIONAL FINANCING REQUIREMENTS .16 ANNEXES ANNEX 1: LETTER OF DEVELOPMENT POLICY (POLICY MATRIX ATTACHED) ANNEX 2: FRDP III TECHNICAL ASSISTANCE CREDIT ANNEX 3: ORT OUTLAYS IN KEY SECTORS AS A SHARE OF TOTAL ORT OUTLAYS ANNEX 4: KEY ECONOMIC INDICATORS ANNEX 5: MALAWI AT A GLANCE TABLE MAP: IBRD NO 29374 The FRDP III was prepared by an IDA team consisting of Sudhir Chitale (Task Team Leader), Watipaso Mkandawire Aline Coudouel, Hassan Zaman, Lalita Moorty, Rose Thunyani (AFTIM1); Jorge Munoz (AFTRI), Elizabeth Adu (LEGAL); Steve Gaginis (LOAAF); Subhash Dhingra (AFTUl), Stanley Hiwa, Donald Mphande, (AFMMW); Overall supervision and guidance were provided by Darius Mans (Country Director), Philippe Le Houerou (Sector Manager) and Robert Liebenthal (Resident Representative).   REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED THIRD FISCAL RESTRUCTURING AND DEREGULATION PROGRAM CREDIT OF SDR 43.5 MILLION AND A PROPOSED THIRD FISCAL RESTRUCTURING AND DEREGULATION PROGRAM TECHNICAL ASSISTANCE PROJECT OF SDR 2.4 MILLION TO THE REPUBLIC OF MALAWI 1. INTRODUCTION 1.1 I submit for your approval the following Report and Recommendation on a proposed Third Fiscal Restructuring and Deregulation Program Credit to the Republic of Malawi for SDR 43.5 million (US$55.6 million equivalent), including IDA Reflows of SDR 0.4 million (US$0.5 million). The proposed operation is made in support of policy reforms designed to accelerate economic growth and reduce poverty. The proposed Credit will help deepen structural reforms launched in 1995 to improve public sector management, promote private sector growth and strengthen the social safety net. The memorandum also seeks approval for a complementary technical assistance project, Third Fiscal Restructuring and Deregulation Program Technical Assistance Project for SDR 2.4 million (US $3 million equivalent) to help Malawi implement policy reforms, especially in the area of financial management, supported by this Credit (Annex 2 provides details). 1.2 The proposed Credit will also assist the Government maintain macroeconomic stability by meeting financing requirements (gap) in the balance of payments (BOP) of around US$ 66 million in 2001' (see Section 5). In the fiscal accounts, the Credit will enable the Government to maintain an overall non-interest expenditure level at about 24% of GDP. This would allow the Government to protect outlays in key social sectors, while reducing domestic borrowing, thereby helping to reduce inflation and interest rates. 1.3 This operation is being presented to the Board along with (i) a Progress Report on the 1998 Country Assistance Strategy (CAS), (ii) HIPC decision point document, and (iii) an interim Poverty Reduction Strategy Paper (I-PRSP) along with a Joint (Bank/ Fund) Staff Assessment (JSA). An IMF Poverty Reduction and Growth Facility (PRGF), together with the HIPC decision point document and the JSA is expected to be approved by the IMF board on December 21, 2000. 2. BACKGROUND AND RECENT ECONOMIC DEVELOPMENTS 2.1 Malawi has been implementing wide ranging reforms since the mid-1990s supported by two Bank adjustment Credits, an IMF ESAF, and bilateral donor supported adjustment programs. The first Fiscal Restructuring and Deregulation Program (FRDP I) approved in April 1996, introduced the Medium Term Expenditure Framework (MTEF) in Malawi's budgeting, supported tariff and surtax reforms, and launched civil service reforms. In private sector development, the program helped to deregulate agricultural production (especially burley tobacco) and trade, and launched the process of privatization through passage of the Public Enterprises (Privatization) Act. The second Fiscal Restructuring and Deregulation Program (FRDP II), approved in 1998, continued the adjustment agenda by further reducing tariffs, prioritizing Government expenditures, improving expenditure monitoring, undertaking rationalization of Government 1 After taking into account inflows from HIPC resources.  2 functions, introducing regulatory reforms in the electricity and telecommunications sectors, and accelerating the process of privatization. 2.2 The Government's reform program has had mixed success. The structural reforms implemented by the Government since 1994 have created a far more open and competitive economy compared to the early nineties. The Government, however, has had less success in restoring and sustaining macroeconomic stability. While the long term trends show definite improvement, there have been sharp year-to-year fluctuations. Droughts in 1994/1995, slippages in monetary and fiscal policies, and sporadic high levels of borrowing by parastatals have resulted in periods of high inflation and interest rates. These have continued to stifle the growth prospects of the small but potentially dynamic private sector. Table 1: Key Economic Indicators 1990- 1996 1997 1998 1999 2000* 1996-2000 1995 Average GDP growth (constant, percent) 3.7 7.3 3.8 2.0 4.0 3.2 4.1 CPI(end-of-period, %) 32.6 6.7 15.2 53.1 28.2 26.0 25.8 Treasury bill rate .. 30.8 18.3 33.0 42.9 45.7 34.1 Exchange rate (MK/$, End of period) .. 15.3 21.2 43.9 46.4 77.3 40.8 Money and quasi money growth (%) 43.6 39.9 2.2 53.1 33.6 20.9 29.9 Current account balance (% of GDP) Excluding grants -15.0 -12.1 -13.9 -11.6 -17.1 -15.2 -14.0 Including grants -8.4 -7.7 -10.5 -2.5 -8.3 -7.8 -7.4 Gross International Reserves (months of 1.7 3.0 2.6 4.0 4.2 3.9 3.5 imports) Fiscal balance (percent of GDP)** Excluding grants -14.0 -13.7 -14.2 -14.3 -11.6 -10.0 -12.8 Including grants -8.8 -9.1 -10.7 -8.1 -4.6 -2.9 -7.1 * Estimates ** Excludes arrears 2.3 As indicated in Table 1 above, there has been an improvemnent in Malawi's macroeconomic situation during the 1990s. Compared with the early 1990s, real GDP growth has accelerated. Moreover the structure of GDP has diversified, showing an increase in the share of manufacturing. Since the early 1990s, the fiscal deficit and inflation have also been lower on average. Finally, Malawi's external reserves have been higher. Currently they have reached a level sufficient to cover about 3.9 months of imports, from only 1.7 months of imports on average, in the early 1990s. 2.4 The improved economic performance in the latter half of the decade was, however, marred by sharp year-to-year fluctuations in output and prices. GDP growth was marked by wide swings ranging between 7.3% in 1996 to 2% in 1998. The exchange rate depreciated sharply in  3 1998 and Treasury bill rates have since then, remained high. Consumer price inflation registered a marked increase in 1998 (53 percent up from 6.7 percent in 1996) driven by devaluation. In 1999 and the first half of 2000, inflation showed a declining trend reaching a low of 22% in May 2000. Since June, inflation has begun to rise and there has been a sharp depreciation in the exchange rate due to: (i) falling tobacco prices and quality, and rising oil prices; (ii) delays in donor disbursements; (iii) devaluation of the South African Rand, and the Zimbabwean dollar; and, (iv) slippage in monetary policy resulting in an expansion in money supply. 2.5 Chronic high inflation has been due to external factors as well as periodic slippages in the control of the overall public sector deficit which has led to high levels of borrowing from the Banking system and a money supply (M2) growth of around 30% p.a. Within the public sector the central Government has not been a major borrower. In fact, over 1996-2000, the central Government fiscal deficit after grants has been on average 7.1 % of GDP. This has largely been financed by external resources; and Government borrowing from the banking system has been small. Large borrowing from the banking system has mainly been carried out by public and quasi public enterprises. In the last six to eight months, inflation has accelerated due to a rise in reserve money growth, high oil prices as well as feed-through effects of the depreciation of the kwacha, which has been exacerbated by declines in the value of the Rand and the Zimbabwean Dollar. 2.6 An assessment of the structural reforms carried out in the 2000 CAS Progress Report2 and the draft Implementation Completion Reports (ICRs) for the FRDP I and II, shows a mixed picture. On the positive side, the reforms have improved the poverty focus of public expenditures and have created a more favorable environment for the operation of the private sector. Since 1998, the Government has made an effort to prioritize expenditures. The share of expenditures going to health and education has increased. (see Section 4). Increased resources, combined with the policy of universal free primary education has resulted in a marked increase in gross enrollment rates in primary education. Table 2: Track Record of Structural Reforms 1995 1999 Trade and exchange rate regime Maximum tariff rate on consumer goods 45% 25% Weighted average tariff rate 19% 14 % Export tax rate 8% 0 % Share of non-traditional exports in total exports 13% 18 % Status of exchange rate Controlled Free float Size of inter-bank foreign exchange market ($ millions) 526 725 Private sector development Number of cellular phone operators 1 2 Number of cellular telephones 5,000 24,000 Number of internet service providers 1 12 Number of commercial banks 2 4 Valuation of stock exchange (US$ millions) 0 154 Agriculture Number of registered tobacco clubs 2,400 24,119 Burley tobacco production by small holders (kg millions) 21 90 Source: Preliminary HIPC Document, June 2000 2 Being presented to the Board in parallel to this operation.  4 2.7 Due to the external sector reforms implemented since 1996, Malawi now has a market determined exchange rate, no export tax, and low average tariff rates of 14% (Table 2). In line with the COMESA free trade agreement3 all duties on trade with COMESA partners have been removed and further progress is being made in trade liberalization to implement commitments made under the SADC, and the cross border initiative (CBI). A small ready made garmnents export industry has recently emerged, employing around 7000 workers in peak periods. In agriculture, the Government lifted restrictions on small holder tobacco production (by amending the special Crops Act) and on private trading of fertilizer seeds and burley tobacco. As a result of these measures, the production of burley tobacco by small holders has increased from 21 million Kg in 1995 to almost 90 million Kg in 1999 thereby creating incomes amongst the rural poor. In infrastructure, the Government has introduced a new regulatory framework and created new regulatory agencies for power and telecoms. Currently there are two cellular operators and the number of cell phones in Malawi has increased from only 5,000 in 1995 to 24,000 in 1999. 2.8 Progress was, however, less than expected on reforms which called for major institutional change and required strong implementation capability. For instance, despite commitment on the part of the Government and substantial technical assistance, the integration of the MTEF into the budget process is proving to be difficult. Similarly, further progress needs to be made in improving mechanisms for expenditure control. Progress on civil service reform remains modest. Here, while the number of Ministries has been reduced and some Government services have been contracted out, the problems of staff rationalization and salary compression have not been resolved. Similarly in agriculture, the privatization of ADMARC activities are proving to be more difficult than earlier envisioned. The liberalization of the trade regime and the lowering of tariffs have improved the environment for the private sector, but poorly functioning infrastructure and high interest rates continue to remain major constraints to private sector growth. In road transport for instance the current regulations restrict the free movement of regional transport operators throughout Malawi. Similarly, Air Malawi is overstaffed and inefficient. Consequently, the costs of road and air transport are prohibitively expensive in a landlocked country such as Malawi, affecting the competitiveness of the private sector. 3. THE GOVERNMENT'S REFORM PROGRAM - THE FRAMEWORK 3.1 The Government's program has been outlined in a number of Government documents and has been discussed widely with stakeholders4. A new Minister of Finance deepened the fiscal reform agenda by announcing a "Ten Point Plan" in March 2000. The plan includes measures to enforce strict expenditure controls, proposes a program of cost recovery for items of exclusive consumption, strengthens controls on parastatal borrowing and recommends greater expenditure prioritization drawing on the joint Government/World Bank Public Expenditure Review (PER). These measures were at the core of the 2000 Budget. 3.2 More recently, the Government has initiated the preparation of a Poverty Reduction Strategy Paper (PRSP). An Interim PRSP (I-PRSP) is being presented in parallel with this operation. The I-PRSP describes in broad terms Government's medium term strategy to address poverty, presents a road map and institutional arrangements to prepare a full PRSP. 3.3 The I-PRSP medium term strategy projects broad based and sustainable growth, anchored in small holder agriculture and economic diversification through private sector development. The 3 This is limited to COMESA countries actually joining the FTA (i.e.) on a reciprocal basis. 4These include the Vision 2020, the Policy Analysis Initiative and more recently, the series of papers presented at the May 2000 Consultative Group (CG).  5 I-PRSP emphasizes three key reasons for the persistence of poverty: macroeconomic instability, insufficient prioritization of public expenditure towards poverty reducing and growth enhancing areas and low level of private sector investment due to poor infrastructure, excessive public sector borrowing and ownership of assets, and weak public institutions. In addition to focusing on these three aspects, the I-PRSP stresses the need for a sustainable and cost effective social protection system to protect the poor from the effects of policy reforms, and to assist those who cannot fully participate in economic growth. 3.4 In line with the I-PRSP diagnosis, the Government's reform program has four main elements. First, create a supportive macroeconomnic framework, bring down inflation and interest rates; and reduce public sector borrowing to avoid crowding out private investment. Second, restructure public expenditures within an increasingly constrained resource envelope and improve public sector management to improve the delivery of public services to the poor. Improve the quality of education, the availability of affordable health care, and increase efforts to combat HIV/AlDS are key elements of this strategy. Third, create an enabling environment for private sector development including small holder agriculture sector, by improving input supply, marketing infrastructure, clarifying land tenure issues, creating a competitive framework and completing restructuring and privatization transactions in power, telecoms and the financial sector. Fourth, design and implement a comprehensive and cost effective safety net strategy. The safety net strategy will provide the framework for the coordination of all programs. In particular, the previously untargeted and fiscally unsustainable Starter Pack scheme will be transformed to become a safety net program5, which targets the poor. In addition, the National Food Reserve Agency will not be engaged in market intervention for food price stabilization but be limited to its role as a strategic food reserve. 3.5 Macroeconomic Stabilization. At the heart of the Government's reform program is a program of macroeconomic stabilization to bring down inflation and interest rates currently running at about 30% p.a., and 45%6 respectively. Not only do such high rates stifle business activity and therefore growth, they also have an adverse impact on poverty. The Government's stabilization program is being supported by an IMF Poverty Reduction and Growth Facility (PRGF) which is being presented to the IMF board on December 21, 2000. The Government's stabilization program targets a reduction of fiscal deficit (after grants), from 4.2% of GDP in 1999/2000, to 2.8% of GDP in 2000/2001 through strengthening tax collection efforts, reducing non priority expenditures and implementing cost recovery measures announced in the 2000/2001 Budget. A market determined exchange rate would be maintained and broad money (M2) growth would be reduced from 21% in 2000 to 17% in 2001 to be achieved by restricting reserve money growth. 3.6 The proposed Credit is a single tranche operation designed to support the Government's reform program described above. In addition to the actions already implemented we have broad agreement with the Government on the key elements of the medium term reform program in the context of the proposed Credit, other bank operations7 and the HIPC completion point triggers. 5 See Section 4,C,(ii) 6 This is the T-bill rate at the last auction held in October. All other rates move with this rate. 7 Such as the ongoing Privatization and Utility Reform Project.  6 The main elements of the medium term reform program which the Government is committed to implement are described in the policy matrix (attached to Annex 1, the Letter of Development Policy) and include: continued prioritization of public expenditures, expanding cost recovery for public services, completion of the reform of procurement system, Auditor and Accountant General's offices, increasing the availability of teachers and paramedical staff, completing the privatization of Malawi Telecoms (MTL) and Commercial Bank of Malawi, and implementing the National Safety Net Strategy (NSNS). 3.7 While we will continue to assist the Government in making progress on the broad reform agenda (defined above in para. 3.4), the proposed Credit is selective. It is focused on a few important areas where a core set of actions have already been implemented. Section 4 describes the full set of actions and the TA program supported by the Credit. The most important of these actions were: * Presentation of a highly focussed 2000/2001 Budget in July reflecting the findings of the ongoing GovernmentlIDA PER. * Significant progress in the liberalization of telecoms and petroleum import/retail markets. * Adoption of a National Safety Net Strategy (NSNS) including a redesign of the Starter Pack program and a reorientation of the National Food Reserve Agency(NFRA). * Key decisions to separate the financial management and auditing functions within Government by passing new legislation and reform of the procurement system. 4. POLICY REFORMS SUPPORTED BY THE PROPOSED CREDIT 4.1 There are three main areas where specific actions are supported by the proposed Credit. The discussion that follows outlines the main issues, the broad strategy of reform, progress achieved by Board presentation, and subsequent actions. A summary of the reform is given in the policy matrix (Annex 1). Improve Public Sector Management * Improve the allocation of public expenditures in line with the recommendations of the PER. * Improve the transparency and monitoring of public expenditures. * Improve tax efficiency by operationalizing the Malawi Revenue Authority (MRA). Promote Private Sector Development * Liberalize telecoms. * Liberalize petroleum import/retail marketing. * Liberalize the financial sector. Create a Safety Net * Design, create an institutional structure for implementation and begin implementing a National Safety Net Strategy (NSNS). * Transform the Starter Pack program into a Targeted Input Program (TIP) and incorporate it into the NSNS.  7 * Reform the National Food Reserve Agency (NFRA) and limit its role to that of a strategic grain reserve engaged in disaster and relief operations. A. Public Sector Management (i) Improving the allocation of public expenditures 4.2 During the 1990's, there has been a major shift in the pattern of expenditures. Expenditures on health and education have increased from 16.2% of overall expenditures in 1993/1994 to 22.7% of overall expenditures in 1999/2000. Their share in discretionary recurrent expenditures has increased from 22.7% in 1993/1994 to 34.5% in 1999/2000. Increased resources, combined with the policy of universal free primary education has resulted in a marked increase in gross enrollment rates in primary education. Incidence analysis shows that the distribution of public education resources, especially in primary education, has become more pro- poor. Road maintenance allocations have also improved significantly, from $ 1.6 million in 1994/1995 to $ 6.8 million in 1997/1998 and to almost $ 24 million in the 2000/2001 Budget. 4.3 Despite this progress, much remains to be done to improve the quality of public expenditures. Currently, public expenditures are spread thinly over a wide range of activities leading to a sub-optimal allocation of resources and a reduced developmental impact. Tertiary and boarding education, tertiary health care, foreign travel and embassies are just a few activities, where Government support needs to be scaled down in order to fund priority activities. Moreover, the MTEF needs to be strengthened to improve the allocation of funds according to the various prioritization exercises that have taken place when funds are released through the cash budget system. 4.4 Board Conditions Met: Consequently, the proposed Credit is supporting a joint Government-IDA Public Expenditure Review (PER) process designed to provide inputs into budget formulation and the improvement of service delivery. The results of the ongoing PER have been incorporated into the 2000/2001 Budget presented to the Parliament in June this year as indicated below: * One of the problems identified by the PER was the shortage of operations and maintenance expenditures 'for critical public services. In the 2000/2001 Budget, the share of ORT outlays in key sectors has been increased. These include ORT outlays in education, health, agriculture, roads - through the creation of the Road Fund and community development. (Annex 3). * The allocation of medical drugs and medical supplies has been increased to $1.17 per capita to approximate the Better Health in Africa (BHA) norms of $ 1.25 per capita. * The allocation for boarding in the Conventional Secondary Schools (CSS) has been reduced from 16% so 9% of total secondary school recurrent expenditure, and the saved resources allocated to qualitative inputs such as teaching materials. * The announcement of cost recovery measures in tertiary education and introduction of cost recovery measures for other items of exclusive consumption such as passports, visas and licenses. * The creation of a data base for development projects (expanding the coverage of aid - financed projects currently not included in the development budget) indicating their s Budgeted under the category "other recurrent transactions (ORT)".  8 status of implementation. All new projects featuring in the 2000/2001 Budget are restricted to high priority areas on the basis of the PER. Specific low-priority projects have been dropped or suspended in the 2000/2001 Budget. 4.5 Subsequent Actions: The TA Credit accompanying this adjustment Credit would extend the public expenditure dialogue by providing technical assistance in the prioritization of the development budget, carrying out a survey of the quality of public services and the extent of leakage through a flow of funds survey. In addition, the Government has commnitted to continue the expenditure restructuring by making adequate allocations to achieve the following targets over the next two to three years.9 * Maintain the shares of education and health sectors in the discretionary'