Funds abuse On IMF radar

 The International Monetary Fund (IMF) says it is taking the K6.2 billion Covid-19 resources audit report “seriously”, reminding government to focus on tightening loopholes in the public finance management system.

IMF, which is Malawi’s third largest multilateral lender after the World Bank through the International Development Association (IDA), and African Development Fund (ADF), provided $193 million (about K151 billion) last year to help the country meet balance of payments

(bop) needs stemming from the Covid-19 pandemic.

The first disbursement of $91 million (about K71 billion) was approved in May 2020 under the Rapid Credit Facility (RCF) while a second tranche worth $101.96 (about K80 billion) was approved in October 2020.

According to IMF, the additional financing was to help fill the resulting increased external financing gap while providing the fiscal space needed to address critical spending needs amid the pandemic.

Soon after the resources were disbursed, government committed to ensuring transparency and accountability as well as appropriate use of the RCF resources.

However, reacting to the recent revelation of the plunder of the Covid-19 resources, IMF country representative for Malawi Farayi Gwenhamo on Thursday said they are following closely the processes the government is undertaking to uncover how Covid-19 funds were used and how to rectify anomalies.

“What I can say at this stage is that issues of transparency and accountability are critical in relation to the management of the Covid-19 emergency funds and management of public finances in general. As such, IMF takes these issues seriously,” she said in a written response to our questionnaire.

Gwenhamo stressed that the audit findings point to the need for the country to focus on strengthening public finance management systems including public procurement, budget transparency, reporting and audits. She said such issues will be prioritised in their engagements with the Malawian authorities.

She added: “Given that all RCF emergency financing resources were disbursed upfront, the focus is more on the forward looking elements which will require the authorities to tightly focus on closing loopholes through transparency and accountability. The IMF will support the authorities’ efforts.”

Gwenhamo also observed that “at this stage,” the IMF had not received any reports from Malawi Government on how it had utilised the $193 million resources.

This is contrary to a commitment government made before IMF managing director Kristalina Georgieva in a Letter of Intent dated September 24 2020, co-signed by Finance Minister Felix Mlusu and Reserve Bank of Malawi

Governor Wilson Banda.

Reads the letter, in part: “While continuing to implement the measures outlined in our April 27 2020 Letter of Intent, we reiterate our strong commitment to an effective and transparent use of public funds, and to ensure that the aid received, including from the RCF disbursement…are efficiently spent on addressing the crisis.

“Specifically, we are regularly publishing procurement documentation—including tenders, bids, and names of awarded companies, products or services procured and their costs, and names of the beneficial owners of the awarded companies—on the Public Procurement and Disposal of Assets (PPDA) website.”

The letter adds: “To ensure enhanced transparency and accountability, we are also publishing on the PPDA website the results of ex-post validation of delivery on a contract-by-contract basis; we will publish (on the Ministry of Finance website and in the press) quarterly statements on commitments and payments of Covid-19 related activities (in all MDAs, within 90 days after the end of each quarter.”

However, as of yesterday, the PPDA website showed that only seven MDAs namely Malawi Electoral Commission, Central Medical Stores Trust, Queen Elizabeth Central Hospital, Mwanza District Hospital, College of Medicine, Ministry of Health, and the National Aids Commission had published some Covid-19 related expenditure.

Treasury spokesperson Williams Banda yesterday said: “We have already given the IMF the reasons why the audits delayed. We fully agree with them on issues of transparency and accountability. IMF should ensure that there is contact and dialogue with government as use of media will not help.”

Speaking yesterday, governance and public administration expert Tiyesele Chikapa faulted government for failing to publish what it committed to the IMF as well as other development partners who have been assisting Malawi

with resources.

“Commitments are commitments. Government was supposed to be putting on the PPDA website certain key elements like who was awarded the contracts, expenditures made and so on but that has not been happening,” said Chikapa, also a senior lecturer of public administration and human resource management at Chancellor College.

Chikapa spoke as a panellist during a debate titled ‘Promoting transparency and accountability in use of Covid-19 funds’ which was jointly organised by the Economics Association of Malawi (Ecama), Oxfam in Malawi and Integrity Platform.

Procurement specialist Amos Nyambo, who is also chairperson for the Malawi Institute of Procurement and Supply, yesterday said government did not only fail to submit expenditure-related reports to IMF, but it also failed to produce a project implementation manual a month after the effective date of the IMF funding.

He said: “I was, actually, surprised that government was making such promises in the letter of Intent when in its day-to-day business it fails to do the same. There was a need for laid down procedures to guide the country during crises. In other countries and organisations, there are procurement procedures you follow that when you are in a crisis, you just trigger them. But for Malawi, we do not have that.”

On his part, finance and business expert Benedicto Kananza said government was expected to submit interim financial statements and audits on resources from IMF at least quarterly as well as an annual audit.

He also noted that a lot of money was used for unrelated Covid-19 expenditure, as revealed by the audit report, which he said demonstrates failure to meet the objective of the funds.

Quizzed on why the public finance management system is still in a mess when government has been investing in it as a way of winning back lost donor confidence, economist Milward Tobias yesterday said much as the country has hugely invested in strengthening systems and structures, it has retrogressed in making people accountable for their actions and inactions.

“Often when there is financial mismanagement, no one at top level takes responsibility. Issues end at inquiries by the Public Accounts Committee. The volume of audit queries from one audit to another keeps rising yet there are accounts people in offices who are answerable to the Ministry of Finance through office of the Accountant General. What is needed is to fix the chain of command which has been broken,” said Tobias.

Apart from IMF, Malawi also received support from other development partners, including the World Bank, Unicef and the African Development Bank to support the national response plan on Covid-19.