‘Malawi’s credibility to donors at stake’

Government has not conducted quarterly audits on Covid-19 expenditure in line with its commitment to the International Monetary Fund (IMF), a development former finance minister and a government official say may affect Malawi’s credibility in the eyes of donors and other development partners.

In a Letter of Intent to IMF in April last year, government sought a $91 million rapid credit facility from the IMF to help meet the urgent balance of payment stemming from the Covid-19 pandemic and made several commitments.

Among others, government committed:

• To have the National Audit Office (NAO) produce quarterly audit reports—for purposes of transparency and accountability in utilisation of Covid-19-related funds.
• To make public expenditure reports on the Ministry of Finance website.
• Ensure that all government spending relating to the management and containment of the impact of the Covid-19 pandemic will be transparent and efficient.

Government has not fulfilled any of these commitments.

Both—Minister of Finance Felix Mlusu and the Secretary to Treasury Chancy Simwaka—have not been available for comment, but an official familiar with donor transactions in the ministry said this failure may affect Malawi’s rating before the IMF, which is crucial when it comes to inviting more donors to support the country.

The official said contents of the Letter of Intent to IMF are binding and can only be ignored if there is a granted waiver—not to meet some of them based on compelling reasons. The official said failure to publish expenditure reports may be justified on account of unreliable Internet, but audit of Covid-19 expenditure constitutes a gross violation of the agreement.

Said the official: “These commitments are submitted after thorough discussions between government and IMF before they are submitted as part of the Letter of Intent. If the government foresees that it will not be able to fulfill any of the obligations it may apply for non-observance of this requirement and it is waived accordingly”.

Former minister of finance and Democratic Progressive Party (DPP) spokesperson on finance Joseph Mwanamvekha, who co-signed the Letter of Intent alongside former RBM governor Dalitso Kabambe, said he suspects the new administration may have ignored these commitments because it does not have a running programme with IMF.

Mwanamvekha, however warned that this may attract poor rating from IMF as well as general donor confidence.

“There are wide-ranging repercussions. If you disappoint IMF, you may not get support from other donors. IMF works hand-in-hand with World Bank, which gives us a lot of support,” said Mwanamvekha.

He said auditing of Covid-19 funds is even more imperative because Malawi will still need more support from donors who may not be forthcoming because the country does not seem willing to be accountable.

In response to our questionnaire IMF country representative Farayi Gwenhamo could not comment on possible repercussions for failing to fulfil commitments, but said there is an ongoing discussion with government on the same.

She also said she is encouraged to note a lot of national dialogue on issues of transparency on Covid-19 spending in recent weeks.

Gwenhamo said: “That is encouraging and we want to give space for that national dialogue. On the IMF side, we have a new Mission Chief so our discussions are covering a range of issues to ensure a full understanding of the macroeconomic situation and PFM [Public Finance Management] issues, including the reporting of Covid-19 spending”.

On the promise for transparency and efficiency on spending in relation to the management and containment of the impact of the Covid-19 pandemic, government’s transparency has been questioned after the Department of Disaster Management Affairs failed to make available expenditure reports following requests from the public.

Last year, the office of Ombudsman released an investigative report—which revealed abuse of Covid-19 funds. Currently, there are fears that Covid-19 funds amounting to K6.2 billion have been mismanaged, a development which has made President Lazarus Chakwera remove the department’s commissioner and co-chairperson of the Presidential Task Force on Covid-19. The President has also ordered the interdiction of heads of clusters which were given Covid-19 funds.

Apart from IMF, government of Malawi has also received Covid-19 related financial support from World Bank, Unicef and African Development Fund, among other donors.