Cementing Malawi’s aid cracks

 

Blantyre ‑Malawi’s Minister of Information, Brown Mpinganjira, has said the recent re-opening of aid taps by the International Monetary Fund (IMF) signals the confidence the country’s bilateral development partners have in the administration’s macroeconomic performance, financial management and fiscal reforms in the wake of the infamous cashgate financial scam.

IMF had delayed the review of Malawi’s economic performance following the cashgate scandal that saw millions of dollars stolen from government coffers at Capital Hill, the seat of government in the capital city, Lilongwe.

The initial review was expected to take place in October 2013 but was deferred.

The IMF decision follows the completion of the third and fourth reviews of the country’s economic performance under the Extended Credit Facility (ECF) arrangement.

Early this month, the Malawi government sent to the IMF Board a preliminary report on cashgate, explaining steps that government has taken in dealing with the scandal, which was exposed after the attempted murder of the budget director, Paul Mphwiyo, for allegedly fighting to end graft in the southern African nation’s public service.

Minister Mpinganjira said, “Though this is a time for celebration, it is not time to be complacent.”

He said government would continue to tighten its belt in order to bring the country out of the mess that has negatively smeared its image.

Briefing the media, Finance Minister Maxwell Mkwezalamba said government will continue with the reforms that it is implementing to ensure that Malawi remains on track with its programmes as well as those of its co-operating partners.

He said the release of US$20 million brings the total IMF disbursements under the ECF arrangement to about US$79.8m.

The minister also said the board has also extended the US$$156.6m three-year programme, which is expected to end in November 2015.

IMF’s decision to disburse about US$20m in suspended funding to Malawi, pending the cashgate scandal investigations, also promises to re-open aid taps plugged by the countries and agencies that contribute to the country’s 40 percent budget support under the Common Approach to Budgetary Support (CABS).

Revelations of corruption led the country's key donors to withhold millions of dollars in budget support and to demand that the Malawi government investigate and prosecute those involved in stealing state funds.

IMF deputy managing director and acting chair, Naoyuki Shinohara, said the funds were released because, “Malawi’s macroeconomic performance under the IMF-supported programme has remained broadly satisfactory,” and that policy reforms initiated in May last year are showing positive results.

However, he acknowledged that the recent fraud and misappropriation of substantial amounts of public funds and the associated loss of financial aid have negatively affected the country's financial outlook.

Executive director of the Malawi Economic Justice Network (MEJN), Dalitso Kubalasa, welcomed the IMF’s decision but asked government to pursue the people involved in the misappropriation of tax and donor aid.

“The government should make sure that those involved should be brought to book and justice must take its course, otherwise the gesture will not help in any way,” said the head of the local financial think tank.

Shinohara said that to restore confidence in the management of its economy, it would be important for the Malawi government to investigate the fraud thoroughly and address the weaknesses in public financial management exposed by the fraud.

“Government has committed to closely monitor expenditure execution and financing. Government has committed to continued tight monetary policy and fiscal restraint, which are needed to stabilise the exchange rate,” said Minister Mkwezalamba.

He added: “This is a green light to our development partners to continue assisting us. And this becomes particularly important for the CABS that had decided to delay the disbursement of budget support on the account of the looting on government resources, so there is already indication that the CABS [donors] group will come forward to support Malawi by March.”

January 2014
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