The International Monetary Fund (IMF) has resumed aid to Malawi its offer of a fresh $18 million grant. However, this only came after President Peter Mutharika promised to weed out corruption from the Southern African nation.
In 2014, under former President Joyce Banda, Malawi was rocked by one of the biggest financial scandals in Africa, dubbed “Cashgate”, which affected the country’s relations with international donors, including the IMF. During the Cashgate phase, top government officials exploited loopholes in the system to divert millions from government coffers. It is alleged that up to $250 million was lost through fraudulent payments to businessmen for services that were not rendered.
However, the IMF is convinced the new government is committed to rebuilding trust in public institutions and bringing the IMF-supported program back on track, including through maintaining a flexible exchange rate regime and the automatic fuel pricing mechanism. It says bringing inflation down to single digits and boosting official foreign exchange reserves remain key policy objectives. “The Executive Board of the International Monetary Fund completed the fifth and sixth reviews of Malawi’s economic performance under the program supported by an Extended Credit Facility (ECF) arrangement.”
As much as 40 percent of Malawi’s annual budget is donor-funded, with a significant sum tracing back to the IMF coffers.
By George Mpofu