Mwadiwa and Chuka open up on cashgate
Former Secretary to Treasury Radson Mwadiwa and Reserve Bank Governor Charles Chuka have attributed cash-gate to failure by controlling officers in government to conduct monthly reconciliations on their accounts.
Appearing before the Public Accounts Committee (PAC) of Parliament yesterday, Mwadiwa said Treasury discovered the looting of public funds around September 20 2013 when it was doing the quarterly overall reconciliation of government revenues and expenditure ahead of the World Bank and International Monetary Fund (IMF) joint annual meeting in Washington last month.
He said the reconciliation was done to monitor adherence to the zero net domestic borrowing as one of the tenets of the Extended Credit Facility (ECF) government is implementing with IMF.
“To monitor that target, reconciliations are supposed to be done at various levels including ministry level, Accountant General and macro-level. On monthly basis, every ministry is supposed to reconcile or check what they have spent versus the monies that have come out of the Reserve Bank of Malawi.
“The Auditor General has complained on numerous occasions that reconciliations at the Accountant General and ministries have not been done as desirable,” said Mwadiwa.
He said the Finance Ministry learnt about the looting of public funds when he insisted on probing of revelations of over-borrowing by the government from RBM against the zero borrowing target on the IMF programme.
“When I was on holiday in September, I got information that we seemed to have missed the target. I didn’t know that in some targets we had spent more. We should not have over-borrowed as it was reported to me,” said Mwadiwa.
He said, at first, Treasury thought the over-borrowing was resulting from interests charged on its credit with RBM which resulted from the effects of the massive 49 percent devaluation that cost the central bank about K28 billion (US$70 million) in losses.
“The law requires that RBM should not make any losses at any given time. We didn’t have the K28 billion to give to RBM at that time, so we gave a promissory note which attracts interests.
“After a further look at the figures, we discovered that part of the borrowing was on account of a promissory note which had been overlooked. Then I asked my colleagues to take off the interest rates from the over-borrowed amount but it appeared that we still over-borrowed by about K10 billion. We did further reconciliation to go into the specifics and that’s when we stumbled on this issue,” said Mwadiwa.
He said when the over-borrowing was discovered while he was on holiday, he instructed his staff to report the same to former minister of Finance Dr. Ken Lipenga who asked his deputy to lead a team to do further reconciliation of the figures.
“One of the things that needed to be done was reconciliation at the Accountant General. RBM provided the bank statements and all the information to the Accountant General to do the reconciliation but that reconciliation had not been done.
“I insisted that the reconciliation should be done otherwise we would not have discovered these illegal transactions,” said Mwadiwa.
He said his persistence to reconcile revenue and expenditure figures at the Accountant General’s office revealed that for two months there were no records of expenditure in the Integrated Financial Management System (Ifmis) on the Ministry of Tourism account while the RBM statements were indicating that the ministry had spent K5.5 billion (US$13 750 000) in the same period despite its budget for the months being about K300 million (US$750 000).
“When experts went into the system, they discovered that almost all the transactions in the Ministry of Tourism had been deleted. We retrieved the information and discovered all these payments to contractors, then I sought approvals to close Ifmis and the system was closed,” said Mwadiwa.
Chuka and his team, on the other hand, denied knowledge of any cheque amounting to about K1.2 billion (US$3 million) allegedly cashed at RBM offices by Osward Lutepo’s International Procurement System (IPS), saying all government cheques are cashed at commercial banks.
“The bank simply clears cheques for government. The banks were mandated to always honour those cheques as per the agreement between Treasury, RBM and Accountant General. At RBM, we are concerned with the overall borrowing by government as it affects the country’s monetary situation,” said Chuka.
Nice that we are getting some information from Technocrats. But I really have problems trusting Chuka. Maybe the media should give him space to provide enough details that would convince us that he is saying the truth.
One of the major roles of the RBM- is Bank Inspection and Supervision (under Deputy Governor Dr. Kabango). It would appear his doctorate did not allow him to discern, question and stop enormous and unusual transactions in the commercial banks that are routine in any part of y the world. Chuka was grossly (in fact, criminally) negligen) in this regard and should promptly resign with all his other dunderheaded officers!
I have a feeling Chuka is holding back something: some secrets. He has told PAC and Malawians nothing here. He must be seriously probed further.
On the other hand, Mwadiwa apeears ro have cut a picture of candidness; he has told Malawians and the world out there some invaluable information.
Mr Mwadiwa you are lying to PAC. How can ministries reconcile when payments are done by accountant general? IFMIS has a reconciliation module which accountant general is spposed to use for reconciliation. Secondly, reconciliation of funding and disbursements is spposed to be done by treasury of which you were the controlling officer. You deliberately ignored this and why should it come as a surprise in September? You mean your officers were unable to track this for the past months? As a controlling officer you are the first failure.
Malawians use these discussion forums wisely to share good information and ideas on how to move this country to the next level. It is true that ignorance is bliss and that is true in the wake of this cash-gate scandal . The action that has been taken by the international community to block “AID” tantamount to their dropping a nuclear bomb on the whole nation. You are all cheering them on because you are very angry at your govt and you see this donor action taken as representing an apparent reprimand to the govt by taking the money away from them. Since everyone is understandably angry at some criminal elements of the govt or the party so you all cheer that donor action. You have fallen victim to a phenomenon that “ the enemy of my enemy is my friend.” That is worrying me and am panicking knowing that the real damage to the economy is a total wipe-out …the livelihood of every Malawian, regardless.
Some issues I want to make you aware of.
The first is it is not true that donors have withheld “their money” they have withheld your money that pay interest on these loans. They have withheld your approved loan money. Let me explain as simply as I can. AID in this case includes multilateral/bilateral loans. These loans are a) balance of payment (BOP) loans from IMF called extended credit facility (ECF), b) general common agreement on budget support (CABS) from other donors who support things like sector wide approach programs SWAPs where donors pool funds. c) Humanitarian AID for CSO. Roughly speaking, the Norwegian, Dfid, EU funding etc fall in category b) and c). Of the three a) is what governs the ability of Malawi to transact with the rest of the world and is the most critical of all. It influences the Kwacha devaluation, can drive inflation sky high and it governs Malawi’s ability to import goods such as medicine.
By withholding a) and b) above, Malawi economy is in deep trouble. Whereas b) can wait for investigations and is usually the vulnerable one to embezzlement, a) is managed by RBM down to the science. I want to clarify on this IMF aid because that is the one that has dropped a nuclear bomb on the country and it must resume as soon as possible to minimise the long-term damage to the country and the vulnerable. This loan is worth US$156.2m (104.1m SDRs) agreed on 23 July 2012. It is purely intended to support importation, say. Of the total US$150m AID that has just been frozen, only $20m is from IMF and yet it is the one that will bring down the economy. This IMF ECF is a streamlined program conditionality to focus on policy actions that are critical for achieving the program’s objectives. These include quantitative conditions, structural benchmarks and demands regular reviews. The latest IMF review for Malawi was done in June 2013; so that the $20m could be released. Malawi RBM and Chuka passed this detailed point by point review test, according to the IMF report. Therefore, on its own merit, it should be released to avoid this pending total destruction of the Malawi economy that is going to spare no one in Malawi. The AID money is not the donors’ money (wakie, wakie people) but your debts that will hang around future Malawi generations necks. Only humanitarian aid c) is their money. The country is paying interest per day on these donor withheld loans, how is that going to be compensated due to these disruptions in the flow of funds by the IMF? Is Malawi going to get a discount on interest charges for the period the aid was suspended?
People must not be confused that I am not critical of these govt criminal elements. I am, just like all of you. However, I am more concerned with the pending total destruction that you all have been served . Does the punishment fit the crime to blow up the whole economy for the crime a few people have committed? What happened to Zim is about to happen to Malawi with kwacha not being valuable, sky high inflation that really hits the poor people. Unless Urgent action is taken to reverse this.
Against that background, in the chaos of this issue, Malawians you have been taken advantage of your “ holy anger”. This is not donor money but your loan money from the IMF for official reserves. Yes I agree it must not be squandered. Yes I agree CABs can be withheld but not the IMF funds given their devastating impact it has. Why is the IMF part of the common budget support (CABs)? Malawi govt renegotiate this CAB agreement with donors that was first set up in 2000 to separate the IMF. Malawi economy cannot afford to have IMF funds stop not even for a second!!!!! No country can. Ring-fence IMF funds. I completely share people’s anger against the criminals. However, although on the surface it seems ok to withdraw “their funds” against porous hands, you have all been nuked, you have been duped…..!. This country needs to better understand and negotiated these things.
Malawian politicians and civil servants please be ethical and up your game to better manage public funds and development funds. It is embarrassing. In their report the IMF have stated that they are already aware from past experience that successive Malawi govts misuse funds during election years. Please tighten this loophole. However, I also feel that the donor community has also over reacted especially the IMF by punishing the children for the sins of their parents. Billions have been wasted in DRC, Afghanistan etc. No punishment was taken there while small countries like Malawi are punished to the extreme. Please IMF consider the children, the poor of Malawi and the vulnerable for the sake of $20m. Yes, suspend CAB until further investigations but resume$20m ECF asap.
Mr. Ngoma, do you think Malawians are kids? Why write such a condescending comment? This is not rocket science. Every single Malawian knows that the withdrawal of aid will have a devastating impact on the economy. But hey, aren’t people already dying in the hospitals because of lack of medicine? Instead of calling for the stolen monies to be given back to Malawians and for the crooks to be hanged, somehow you want to convince us that we deserve the aid monies because we will pay it back with interest. At the rate we are going, where will we find the monies to pay back? At least the donors did give us monies. But what has our own govt done to us lately? Apart from stealing from us, nothing else. Nada. Zilch!
Thanks Madam, I understand where you are coming from and I respect your view point. You want a socio political solution to the problem. Unfortunately, I am not discussing socio-political side of the equation and please do not ask me to join you on that political issue. I am politically neutral. My interest is the economic consequences of what has taken place. Mine is the monetary dichotomy that this situation has created and the liquidity trap that the country is now plunged into with respect to national balance of payments and official reserves within the framework of the international monetary system. If those seemingly innocuous words warrant your unleashing your politically charged diatribe then I have nothing else to add. Have a good night!
I think it is impossible to achieve the desired macroeconomic growth if we ignorne the political side. I mean it is possible to have economic growth even undre dictatorship as long as there is determination and vision on the part of the leaders. Probably our suffering from the effects of aid freeze will make Malawians wake up and start demanding accountability from their leaders. This is what some of us are hoping for. I mean what is there to gain if aid just ends up in the pockets of a few people? The problem with the PP government is that there is totally lack vision, dont have any manifesto and everyone is just doing what he sees fit. What are Malawians to gain from this, with aid or no aid?
Idiot! Just post your own article.
Yeah, blame the IMF and all the other western donors, you seriously expect them to just keep on splashing dash when it never even reaches the people it was meant for, hahaha, this nonsense must stop . A few greedy people stealing all the money meant for poor Malawians has to stop forthwith. POOR MALAWIAN PEOPLE HAVE BEEN TAKEN FOR A RIDE FOR TOO LONG.
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Somehow somewhere Ngoma your arguments are not clear. I thought what you should be saying is that Malawi needs prudence in managing its resources. IMF/World Bank funds are not the best to rely on. These loans have terrible strings attached and you know them. This is a trap which Malawi will hardly move out. I ve some critiques of IMF/WB policies but I think its not worth while posting them here at the mean time.
The situation Malawi has found its self in is very confusing, mr Confused. What you have suggested is true but that is for strategic policy discussion for a sunny day. The crisis is here and I am panicking about its impact. Let me not go into money issue details here. I will leave that to RBM money authorities to handle it so they can decide how they want to explain it. It is a very sensitive issue. Let me just say that as you will all start experiencing economic decline and crisis, the cause is this IMF loan suspension. It is very sad. It sounds unfair as the real cause is the reckless scandal that has provoked a reaction from IMF. In the right of these circumstances it sound confusing that I am querying someone else instead of just focusing on the criminal acts.
My predicament is this, supposed you Mr Confused called your colleague “stupid” and he gets angry with you and cuts legs of your entire family. How am I supposed to react as a witness? Yes you were provocative but the punishment did not match the crime. Even that example does not explain the case in point. Suffice to say, unless IMF loan resumes sooner , sit down, bend your head in your knees and kiss anything you see goodbye in economic wellbeing terms! I am sorry I cannot be anymore direct but IMF knows exactly what I mean. I appeal for their lenience to lift their embargo asap even before other donors….!
let us be honest of all those checks which controlling officer signed. In fact Mr. Mwadiwa was controlling officer for Ministry of Finance where Accountant General department was under him. all of theft took place in accountant general department as controlling officer what did he do was he weak did sign any check. Please in any case do we really deserve to call our ps controlling officers lastly let us not be clever on this issue each and every Malawian needs to lament over this issue. As ST Mr. Mwadiwa should have requested early retirment. It is shameful still to serve in the Government where the country was almost getting bankruptcy. As of now the Governor of RBM, Accountant General should have already gone on early retirement keeping them in the system is huge political liability on the current government. Is it not the same Mwadiwa when he was Budget Director the same Malawi Parliament called him to be fired. Check hansards of 1990’s. He was lucky just removed and eventually promoted to PS
While you are going back and forth here please know that this weekend a meeting was held to discuss Mphwiyo’s options. JB and her sycophants are planning a dinner in Mphwiyo’s honour when he returns home. In order for Mphwiyo not to reveal JB’s involvement in cashgate, The President has reportedly asked for Mphwiyo’s silence by offering Mphwiyo the following options:
1. To be sent to New York as a Malawi Representative to the UN.
2. To become a diplomat (Deputy High Commissioner) in London.
3. To take MWK500 Million and retire young and rich and never work again.
The deal will be sealed this coming week.
For me it’s as simple as Joyce and her team returning the money they stole. By accepting doing that confidence and trust will be restored to the donors. Joyce has not heart for Malawi hence not even fit to continue in office as president.
Dr Kenneth Kaunda was right that Malawians are like stones. They are dead.
When was the looting of government coffers started?
I thought its after the installation of IFMIS?
Wake up Malawians. This is our money and we want it back today. We burn petty thieves everyday in our townships for stealing cassava, and the odd television. Why can’t we do the same to these mega thieves? We know them, their names are in all papers, chenjerani. We need our money back before December, or we start applying mob justice to you and your families. We are ROBINHOOD & AVENGERS
Mr Ngoma you have a problem. It seems you are up to something but you are failing to convince us join your wagon. Though denying, you are politically trying to protect someone or some political movement but cunningly. You kidding boy. You and us have done the same philosophy and propaganda is what we are much aware of. Contribute to the better of the nation as a whole and not for the better of a certain sector of the Malawian society. However, I respect you freedom of expression.
I actually applaud Ngoma’s attempts to make Malawians see the other side of the equation. Very few people are willing to think about the ramifications of withdrawn donor aid. And to start saying he is up to something shows intolerance of different opinions. I for one believe that even though the situation is bad, we can easily dig ourselves deeper through the spreading of misinformation and emotional rantings on the net.
Ngoma is standing up for Malawi here. Unfortunately, he is trying to explain an economic concept to the public who are not economists. Donors have with held budget support money. That we all understand. They have done something else which Ngoma is querying. They have also “suspended” Malawi from the international monetary system to make things simple.
(http://en.wikipedia.org/wiki/International_monetary_systems)
As I understand it, Ngoma is asking IMF, was it necessary at this stage? Secondly, how soon can this be lifted so Malawi can resume international trade? Otherwise Malawi cannot import any goods. Komai nu munthu asafunse a IMF.