UK says Malawi aid freeze not punishment

Nevin: There should be systems that will not allow pilferage of public funds
Nevin: There should be systems that will not allow pilferage of public funds

British High Commissioner Michael Nevin has stressed that the donors’ decision to suspend budgetary support to Malawi is not meant to punish the country but to ensure that proper systems are put in place to safeguard public resources.

Addressing the press in the capital, Lilongwe on Monday after meeting Minister of Information and Civic Education Brown Mpinganjira, Nevin said so far Britain has withheld 17 million pounds.

He said Britain will find alternative channels to ensure that the withheld funds reach the intended beneficiaries.

Said Nevin: “Withholding aid is not about punishing Malawi. We want government to put its house in order by implementing systems that will not allow pilferage of public funds.

“As [the United Kingdom], most of the funds that we give the country are still coming, but it is only budgetary support that we have delayed until government puts its house in order.”

He said measures undertaken so far by the Malawi Government are encouraging, but noted that more still needs to be done to deal with those involved in the plunder.

Mpinganjira said donors are right to withhold aid because no sane person can put money in pockets that have holes.

“We are working closely with donors to clean up our house. There are forensic experts from the UK who are working with us because once this cashgate issue is sorted out, then there will be no rooms for stealing,” he said.

Mpinganjira also disclosed that government’s electronic payment platform, the Integrated Financial Management Information System (Ifmis), whose abuse has been blamed for the free-for-all plunder, is now operating at 95 percent of its capacity and most of the issues that led to its suspension have been sorted out.

Currently, an international firm engaged through the British government alongside the National Audit Office has started working on a forensic audit which is expected to be ready by January next year.

Reports of plunder of public funds came into the limelight after the shooting of Ministry of Finance budget director Paul Mphwiyo in Lilongwe on September 13 2013.

Three weeks ago, Malawi’s major donors under the Common Approach to Budgetary Support (Cabs) announced the withholding of $150 million (about K60 billion) earlier earmarked for October and December quarter of the

2013/14 financial year due to financial mismanagement at Capital Hill.

Bankers clear name, blame government


The Bankers Association of Malawi (BAM) has blamed cashgate on government’s failure to put in place internal controls that could have prevented its workers from siphoning money through private companies.

The BAM executive appeared before the Public Accounts Committee (PAC) of Parliament in Lilongwe yesterday to respond to queries on the role the commercial banks played in the Capital Hill cashgate which has resulted in loss of billions of kwacha.

BAM president William Chatsala said the responsibility of cheques rested in the hands of customers, in this case, government because the banks have no mandate to deny encashment of cheques when all requirements are met.

He said: “The responsibility of the cheques rests with the customer. The internal controls are the responsibility of the customer because even when a cheque is not confirmed, but the signature is correct, there is no legal requirement that the banks must not pay out.”

Chatsala, who is chief executive officer of Indebank Limited, said it was the responsibility of the account holders, government or individuals, to secure cheques and movement of cheque leaves to prevent such type of fraud as cashgate.

He warned that as long as internal controls in government were not strengthened, a similar catastrophe could happen in future.

So far, the major conduits for the pilferage have been identified as Ministry of Local Government and Ministry of Tourism where six buses valued at K520 million were bought without the knowledge of the ministry’s controlling officer.

Chatsala stressed that the association was not a regulatory body to check abuses within the industry but a member-based association which protects the interests of the banking sector.

Responding to a question from the committee on how the banks could allow cashing of a cheque amounting to K1 billion, Chatsala said it would be possible if the branch processing the cheque applied for an extension of the limit.

“If the money belongs to the person, then there would be no need to clear the cheque through Reserve Bank of Malawi. The bank would just report the transaction to the Financial Intelligence Unit,” he said.

Chatsala told the committee that the banks were cooperating fully with the bodies investigating the scam and members of BAM were ready to appear before the committee to respond to queries.

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    A Chatsala mwayankha momveka ndithu. Osadera nkhawa mwini nkhani adziwika. Chuka ndiye mwini nkhani. Pafupike patalike Chuka ndi PP apezeka monga akatakwe pa nkhaniyi. Kodi pano zikungobisika chifukwa chakuti JB akadali pa mpando, koma akangochoka kapena kuchotsedwa zonse ziululika.

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    Ngoma, Thomas, London · Edit

    This is a really welcome British statement and a very precise one! Unfortunately, to the public aid withdrawal is aid withdrawal. In reality, there are degrees of aid withdrawals. Three categories of aid A) Balance of payment support for official reserves B) Govt Budget support and C) Humanitarian aid through NGOs/CSOs. When A) is withdrawn, it has serious consequences on the whole economy of Malawi – an option I call the “nuclear” option because it spares no one. The kwacha devalues and inflation goes sky high and the country cannot import anything. This option is taken when a country is manipulating its currency exchange rate as Malawi did under DPP, as you all know. Option B aid suspension is specific to the pledged budget support. Given what has happened with PP govt of shall we say “porous pockets” this type of aid has been suspended until the tailors can fix the pockets. There is no doubt this will affect the govt cash-flow buts its impact is not as deadly as if option A had been taken. Option C) has not been affected.
    Where some of us came out crying “blue murder” was when the IMF came out and made a statement implying that Option A aid freeze was a possibility. Surely, as you can all see now, that would have been a punishment that does not suit the crime. No currency manipulation had taken place. All IMF review reports so far have come back as “good progress” meaning good monetary procedures have been followed by RBM not to warrant option A freeze which sends the Malawi economy into “full cardiac arrest”, so to speak. It is against this background that some of us cheer the ambassador’s statement as being precise confirming aid freeze to option B – not that any bias is involved at all, lol.

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