Cashgate ghosts stir RBM debate

Former Cashgate prosecutor Kamudoni Nyasulu has claimed that government’s systematic undermining of the Reserve Bank of Malawi’s (RBM) independence enabled Cashgate.

But two other prominent lawyers have said giving RBM full independence would be catastrophic to the economy because it could make the central bank unaccountable.

The RBM itself says Nyasulu’s assertions are based on outdated legal instruments.

Nyasulu, in his second series of A Jaded Decade of State Capture, titled Amendments to Undermine Reserve Bank’s Autonomy issued on December 28 2019, argues that in the 2010 laws, government systematically and cumulatively undermined the legal and regulatory framework for transparency and accountability in money supply and control, enabling the plunder of public resources dubbed Cashgate.

At the core of Nyasulu’s argument is Section 4A (3) of the 2011 Act, which states that the Minister of Finance, Economic Planning and Development would, by written directions, determine the policy to be adopted by RBM.

He said given that there is no criteria the minister should follow to determine public interest or inadequacy of a policy as basis for, say, overturning RBM’s policy directives, government can abuse such powers for political expediency.

Asserts Nyasulu: “It would thus turn out that the board [of governors at RBM], after rigorous discussions chaired by the governor, sets a policy, the minister would whittle it away on the pretext of public interest or that the policy is inadequate.

“This brings to the fore the unsavoury repercussions; accumulated domestic payment arrears, about K38.7 billion in 2013 rising to K157 billion in the 2015-2016 financial year, because government had simply changed government payments policy.”

Nyasulu said through a memorandum of understanding (MoU), RBM was excluded from vetting government cheques before they were honoured by commercial banks, leading to payments being made with no funding in the budget.

 He added that virtual funding was being created in the Integrated Financial Management Information System (Ifmis) with no funds in government Account No.1 or designated accounts maintained at and by RBM.

“Reconciliation of expenditure between Treasury and the Reserve Bank against honoured government cheques became infrequent and then stopped altogether. Although the Accountant General could only issue a cheque to the maximum value of K500 million, there appears to have been no limit as to how much a commercial bank could encash,” contends Nyasulu.

Chairperson of the Public Accounts Committee of Parliament, Ken Kandodo, also raised the reconciliation problem in an interview this week, saying Cashgate largely happened because reconciliation between RBM and the Accountant General’s office was infrequent.

At the height of Cashgate in 2013—when the country woke up to news that a cabal of civil servants had collaborated with some private sector players to siphon K24 billion within six months—it came to light that people would encash a government cheque of as much as K3 billion on the same day.

But some leading private practice lawyers said in separate interviews that full autonomy for RBM is recipe for disaster.

One of them is John-Gift Mwakhwawa, who warned that it would be “catastrophic” to make the RBM fully autonomous without checks from the Executive.

He said: “You can’t leave RBM off the hook of the supervision and direction of the Executive because they can turn into an unruly office. It is trusted that when the minister exercises the powers they have, it would be done in good faith, for the good performance of the RBM in trust that those interventions will be made in the furtherance of then general good polices of governance for financial prudence.

“There has to be a balancing act. You can’t leave the RBM without control from the Executive, but at the same time you have to limit that control. The beauty with it is that decisions of the minister are amenable to a judicial review, so they shouldn’t be much fear in that area.”

Mwakhwawa further noted that Cashgate was a result of failure by accountability bodies such as the Financial Intelligence Authority and the Anti-Corruption Bureau (ACB) to operate effectively.

His counterpart Justin Dzonzi said Executive oversight of RBM is critical.

He said: “Government needs to come in and check the central bank’s policies.”

On his part, MLS president Burton Mhango said in an interview on Wednesday there is need to balance between the autonomy of the bank and influence of the Executive on the matter.

“We need to look at what effect autonomy of RBM has had in the past and see whether we need to change. At the end of it all, we want a functional system that benefits our institutions and monetary policy,” he said.

RBM spokesperson Mbane Ngwira on Tuesday said the issues Nyasulu raised were dealt with last year under the new RBM Act of 2019.

Speaking after a town hall meeting RBM organised in Mzuzu to interact with stakeholders recently, RBM Governor Dalitso Kabambe assured Malawians that the central bank is on top of things when it comes to curbing Cashgate in its system.

He said: “We have changed the tradition of being simply a banker to government, a holder of its account. We are going further to check what they are paying for and to check all the attachments that are coming with those payments.”

On his part, Economists Association of Malawi (Ecama) president Chikumbutso Kalilombe said Malawi does not just need a change of laws to reduce corrupt tendencies, but a mindset shift toward desire for the common good.

“Of course, it does good to have all-encompassing laws, but desire to have them work ranks higher. For Parliament, as a general principle, we would advise that they pass laws that are robust, but also add the moral side to the equation,” he said.

But Budget and Finance Committee of Parliament chairperson Sosten Gwengwe said most laws pass through Parliament without much scrutiny because legislators are not given enough time to review them.

“Let MPs have the 28 days to go through these bills, because some like those on finances are too technical, so the MPs need time to consult. But we have entrenched the tendency of waving the 28-day rule, MPs are just ambushed,” he said.