Malawi seeks to win back donor support

Malawi's government has begun to radically overhaul its public expenditure oversight and delivery systems in a bid to win back donor support which was suspended over a multimillion-euro corruption scandal involving ministers close to president Joyce Banda.

Foreign donors, including the International Monetary Fund, withheld direct budgetary support worth about €120 million recently, which accounts for about 40 per cent of the nation’s budget, after the reports of rampant corruption and abuse of public funds.

The scandal, dubbed Cashgate, prompted Ms Banda to dissolve her cabinet on October 10th and sack the finance and justice ministers, as well as appoint international investigators to probe the allegations that dozens of officials were involved in corruption.

The country's new finance minister, Maxwell Mkwezalamba, said in an interview that Ms Banda has committed to sparing no one found to be involved in the corruption, and that two high level-committees had been set up to combat the internal theft and fraud.

So far, 46 people have been arrested in relation to the corruption and eight of these, including the former justice minister, have already been committed to court. Their bank accounts have been frozen and their ability to transfer assets suspended.

“The government has also adopted an action plan on improving public financial management systems, and there has been emphasis on the need to ensure it is implemented.

“In the short term there are simple issues like recruiting international experts to do the forensic audit, which has already been done. But there are also issues of ensuring that governance institutions are adequately funded to do their work and this is an ongoing activity,” he said.

In the medium to long term, strengthening government institutions such as the Anti-Corruption Bureau and the office of the auditor general are also a priority, as is reviewing the Anti-Money Laundering Act to give powers to the financial intelligence unit to prosecute cases.

“The action plan covers several areas, so you have matters of accounting and auditing, issues to do with administration, reforms, but also the prosecutions that are taking place because people have allegedly been involved in corruption,” Mr Mkwezalamba said.

The Cashgate scandal allegedly involved the theft, predominately by civil servants, of millions of euro from the finance ministry, which the government said involved the abuse of financial loopholes.

Mr Mkwezalamba explained that preliminary investigations had found there were weaknesses in his ministry’s integrated financial management system, a computerised package used to manage and distribute public funds.

“It has been discovered that the system had some inherent weaknesses that made it possible for some individuals who do not love their country to get into the system and syphon out significant amounts of money for their own benefit.

“One of the weaknesses was that to get into the system we use passwords. At some point there was a lax attitude by some unscrupulous individuals to share these, which led to some others getting into the system to make payments for goods and services that were not delivered,” he revealed.

The withholding of donor aid, coupled with the fallout of the corruption scandal, has plunged Malawi back into an economic crisis that Ms Banda had managed to pull the country out of over the past 18 months.

However, Mr Mkwezalamba said he was hopeful that the rollout of the government’s new corruption action plan, as well as its IMF-sanctioned economic programmes, would bring back donor confidence and funding in the near future.