Britain will not resume budgetary support unless suspects in the Cashgate are prosecuted and Public Finance Management (PFM) system is reformed, a British Government official has said.
The news is a big blow to the country which has been forced to implement a K742 billion-zero aid budget with a deficit of K107 billion after being snubbed by donors who traditionally fund 40 percent of its national budget.
Speaking in an exclusive interview, Permanent Secretary of Britain’s foreign aid wing, the Department for International Development (DfID), Mark Lowcock, who this week visited Malawi to conduct talks with government officials, described Malawi’s PFM as a “leaking bucket”.
He warned there is no clear time frame on resumption of support, saying the United Kingdom (UK) has made its position clear on its expectations before budgetary aid resumes, saying donors will collectively decide when to resume support.
He, however, said the UK insists on an “end to a culture of impunity”, reforming PFM and prosecution of Cashgate suspects.
“What we have said is, Cashgate is a major problem, and it is a basic problem for people of Malawi, the taxpayers here whose money was stolen. And two things for us to go about it; the first thing is for a proper series of investigations, a proper judicial process to be taken forward so that concerns others might have about a culture of impunity are effectively addressed.
“The second thing that needs to happen; the problems that allowed the theft and fraud, the Cashgate, to take place are fixed and a proper financial management system, that means a lot of work in financial management. Until those problems are fixed, it will perhaps not be the most appropriate thing for donors to put more money into a leaking bucket,” said Lowcock.
He said the UK will this year contribute over $100 million dollars in bilateral grants in addition to contributions channelled through the World Bank and the Global Fund on Aids and malaria.
He added: “The process is for the government to complete and take forward the reforms for the weak financial management system and to take forward the policy thinking on the IMF programme that will allow growth and then, when the donors collectively are satisfied that if they put money back, it will be used as intended, that will be the time when discussion of resumption can take place. Everyone wants to support Malawi, but no one can support it in the current position. We have not set up an artificial time frame for the government.”
Speaking in a separate interview, Finance Minister Goodall Gondwe said government was doing all it can to restore confidence in PFM, but admitted the process will take time. He did not specify on the measures.
“I cannot give a timetable on when we will be able to do this, but it will happen. However, I don’t want to create an impression that we are doing this because of donors, we are doing this for Malawians. This is good for Malawi. Malawians don’t want Cashgate to happen again,” Gondwe said.
While in the country, Lowcock held talks with several officials including Vice-President Saulos Chilima, senior officials from Treasury and Justice departments and civil society leaders, among others.
“The new government has inherited a number of challenges and the UK is keen to understand the reform agenda the new government plans to take forward and how best we can best help them. And that has been the focus of my discussions; meeting government, private sector, civil society organisations, international community,” said Lowcock.
Lowcock, who has previously worked in Malawi and visited periodically over the last 10 years, including in 2012 during the late Bingu wa Mutharika presidency, said he was in the country to discuss with government on tackling the challenges facing the country.