Several donor nations are withholding aid to Malawi in reaction to a growing scandal over government graft known as Cashgate. The latest to announce the delay of funding are donors under the Common Approach to Budget Support (CABS) who are meeting in the capital, Lilongwe. Government authorities say this is likely to pose economic problems in a country where 40 percent of its national budget comes from donor aid.
Announcing the move during its first review meeting of the 2013-2014 budget on Thursday, the funding group said it has decided to delay its aid to Malawi after its loss of confidence in the government’s financial system. The so-called Cashgate scandal has thus far resulted in the looting of more than $250 million from government coffers.
Sarah Sanyahumbi is co-chair of the CABS group and head of Department for International Development (DFID) in Malawi.
“It is clear from what we already know, even though investigations are ongoing, that there are serious weaknesses in the government’s financial systems which allowed [what] we call Cashgate to actually happen. So we have seen serious weaknesses which have enabled people to take money out of the government system. While that is the case, you know the donors cannot responsibly continue to put money into government systems. So at the moment, while the investigations are going on, we have delayed any funding which was planned to go into the government system," said Sanyahumbi.
The decision comes a few days after the European Union and DFID withheld their funding to Malawi until authorities come to the root of the financial looting. Norway has completely suspended its funding to Malawi because of the problem.
Sanyahumbi, however, believes not all is lost.
“[But] that doesn’t mean that all development support to Malawi has stopped. It’s budget support and sector budget support [that has been affected]. So all other programs or projects like in health, education, food security, etc. etc. are still ongoing," she said.
But Finance Minister Maxwell Mkwezalamba pleaded for mercy from donors, saying the suspension of budget support for Malawi spells doom for the country.
“We are concerned with the decision to delay this disbursement. The impact on the economy on Malawi people will not be good. When you look at what we were expecting for this quarter alone, we were looking at $150 million, and if it doesn’t come, which is likely to [because of] the case, this means we have to have another look at our budget framework," said Mkwezalamba.
He assured donors that the government has an action plan that will help get to the root of the issue and bring to justice the culprits in the looting.
But Sanyahumbi said there is no turning back because the “line” already has been crossed.
“Really, we expect significant commitment to action to be taken. We are talking about an extraordinary path. This is not business as usual. As far as we are concerned, the line has been crossed, so once the line has been crossed you cannot go back to what you had before," she said.
An International Monetary Fund (IMF) team is in the country on a make-or-break mission to gather information on the Cashgate scandal.
Its weeklong fact-finding efforts will determine Malawi's fate on whether the IMF will further disburse its $20 million under the Extended Credit Facility.