Malawi should take drastic action to normalise relations—IMF
The International Monetary Fund (IMF) on Wednesday asked authorities to ensure “drastic actions” to normalise relations with the country’s development partners following revelations of looting of public funds at Capital Hill.
The IMF also condemned the looting, saying the situation has triggered anger among Malawians as well as uncertainty to Malawi’s economic outlook.
“This is a crisis situation and needs drastic actions. I am talking of the crisis because the fiscal situation was designed on the inflows of substantial amount of external support and that is at risk because of what you are probably calling it cashgate,” said IMF mission chief Tsidi Tsikata at a news conference in Lilongwe marking the end of a two-week mission by an IMF team.
The Washington-based team, led by Tsikata, was in Lilongwe between November 5 and 20 2013 to discuss the third and fourth country reviews under the Extended Credit Facility (ECF) programme.
Said Tsikata: “In our interaction with Malawians, we also felt a lot of anger and frustration [among Malawians] and I think the combination of anger among Malawians themselves speaks the challenge that the government faces and the government needs to be taking measures to address the concerns of Malawians.”
He said apart from bringing economic uncertainty, direct loss of public funds through theft at Capital Hill has also put at risk external financial assistance to the budget.
Tsikata said development partners became reluctant to disburse funds into government systems they viewed as insecure.
Two 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 the October and December quarter of the 2013/14 financial year due to financial mismanagement at Capital Hill.
According to Tsikata, the main purpose of their review was to reassess the assumptions underlying the programme and to agree on remedial measures to address the governance weaknesses revealed by the massive fraud and to reverse the fiscal slippage.
He also said the IMF welcomes the recent announcement by government of reductions in the travel budget and in other lower priority expenditure items.
Tsikata also commended the policy reforms initiated in May 2012, saying they have produced positive results.
On his part, Minister of Finance Maxwell Mkwezalamba welcomed the assessment and described the discussions over the past two weeks as ‘fruitful.’
“We express gratitude for the spirit in which these discussions were held with the IMF mission and we welcome their recommendations,” said Mkwezalamba.
