Zero-aid budget: Malawi plans to win back donors amid corruption scandal

Like many aid-dependent countries in the developing world, Malawi cannot balance its books without donor support, which makes up as much as 40% of the national budget. Yet because of the ongoing nightmare of an unprecedented corruption scandal, known as “Cashgate”, it faces a massive suspension of aid directly to its government.

Chinsinga

Chinsinga

In the face of that financial nightmare, Malawi  announced a “zero-aid budget” for 2014/15, an attempt to win back the trust of major donors (especially the UK) who do not want to see their money wasted. The cuts mean many vital public services face a deeply uncertain year in a country whose GDP per capita is only $226 per head. How did it come to this?

A shot in the dark

Cashgate broke into the public domain in a dramatic fashion with an assassination attempt on former budget director Paul Mphwiyo in front of his mansion in September 2013.

There are two competing narratives of the events that led to the shooting: in one, favoured by the former president, Joyce Banda, Mphwiyo was shot because he was championing a crusade against corruption in the public sector. In the other, his shooting was a result of a corrupt deal turned sour.

Whatever the real motive behind it, Mphwiyo’s shooting opened a terrible can of worms. Huge sums of money, in both local and foreign currency, started showing up in unlikely places; civil servants and businessmen were caught with huge stashes of hard cash in car trunks, under mattresses and in the ceilings of their houses.

The speculation is that as budget director, Mphwiyo was at the centre of the misdeeds Cashgate exposed. He is now answering charges of money laundering to the tune of 2.1 billion kwacha (US$ 4.4m) – and such was the extent of the scandal that then-president Joyce Banda was forced to fire her entire cabinet in October 2013. Many of them were subsequently arrested.

A terrible cost

The plundering of public resources is hardly unheard of in Malawi – but still, the scale of Cashgate was a great shock. The anomalies exposed by a forensic audit commissioned by the government of Malawi, with support from the UK’s Department for International Development, were colossal.

According to the report, as much as 20 billion kwacha (about US$42m) disappeared from government coffers in less than a year through a systematic plunder of public resources, where politicians and businessmen connived with civil servants to skim millions of kwacha in payment for ghost goods and services.

Just to put the size of the scandal in perspective, payments to banks without details of beneficiaries amounted to 2 billion kwacha (US$4m); payments not supported with liquidation documents amounted to 3 billion kwacha (US$6.2m); payments for procurement without internal procurement committee’s authority amounted to 6 billion kwacha (US$12m); and payments made outside the central payment system amounted to 12 billion kwacha (US$25m) – all this in a country whose GDP is a mere $3.7 billion.

On any measure, Cashgate should not have happened. And in fact, Malawi’s government had long been trying to clean up its act before the scandal hit. On the World Bank’s recommendation, it adopted a new IT-based accounting system to improve the management of public finances. That system failed; inquests have shown that the system was rolled out without putting in place all the necessary prerequisites for it to function effectively and efficiently.

Other decisions made by the Malawi government helped create an environment in which public resources could be brazenly and casually looted. For example, in 2005, the government authorised a consortium of three banks to honour all government cheques at any of their branches for any amount without limit – even when the government was experiencing liquidity constraints. That effectively removed any ceiling on public spending.

Understandably, donors have reacted to Cashgate by withholding budget support to the government – and it is against this backdrop that Malawi is implementing swingeing budget cuts in a desperate attempt to win back donors’ faith.

Its attempt to rebuild its aid-dependent finances and international reputation will be a case study not only in contrition, but in how to manage austerity economics in the tightest of constraints.

  • Blessings Chinsinga : Associate Professor, Department of Political and Administrative Studies, Chancellor College at University of Malaw
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11 thoughts on “Zero-aid budget: Malawi plans to win back donors amid corruption scandal”

  1. unexpected says:

    If you want to win back your donors solve your cashgate case with proper law enforcement,malawi’s justification on cases has become so naive when it comes to justice itself being served,take for example i bet you people the ring leader of this cashgate issue is still out there free and the reason behind being,too much corruption in our goverment leaving people naive hence no justice,truly if they want this cashgate investigation to end,they need to stop being naive and act a little human…

  2. Fathi Alshab says:

    kodi muliranju nfiti ili pankhonde
    amakawi sitidayamva ndi wakuba sux pounds muli ubde tipatseni wakuva tenweyo…. nanga uzi nwadabwanji..olira naliro myumba ana anamca fugo ..kenaja aha naliro awokera myumva tiyeni akumanda zibwera tijayike mtembo…ndiye mukuti skajwanso fugolu linakoma? poti lina ndi la kumbuyoko aoyetsa a fusi! kikiki! kalanga dziko ilo kapita ku mbamva zezezni sone in jury liobes….ndiye mukuti tidikire moaka 2019 fir what? distressed country indeed!

  3. sebeleza says:

    politicians are evil to hell with em, i would rather opt for military rule

  4. Apm zikuvuta pati aprofessor?

  5. Paul J.C.Mwafulirwa. says:

    Whether one likes it or not,the truth of the matter in the current situation that the country finds itself in is to quickly put our house inorder. In the short term, let the 2005 – 2012 investigations be done professionary but within the acceptable time frame. No amount of political brainwash, finger pointing, delayng tactics and political patronage will save the country from its current economic suicidal course. Let us all put our national interest above personal political patronage.

  6. Poor Malawi ruled by thieves what do you expect?

  7. Cicero says:

    Some comments show how some Malawians backward they are. I thought Malawians including Dr Chinsinga are exposing how these Thieves so called policians are the primary source of present worst situation. MULUZI 1.7 billion, Bingu/PETER 92 billion & JB 20 billion. Please love our country stop supporting these hardcore criminals. If we love our let us go & burn houses of these thieves. Mob justice is quick & effecient way of delivering justice not courts. We do that then we start afresh. Remove immunity for the number one thief called number citizen. APM stands for Apa Pali Mavuto. Indeed pali mavuto apa.

  8. Masharubu says:

    Comment No. 1 , Mika Kumbire or whatever, you must be a retard . If APM is listening to people like you as he pretends to run this country, then we are in worse trouble than I originally feared .

  9. Alfred Munduwabo says:

    No2 , your have a point , but please leaders or politicians should not thieve our taxpayers money which is not a healthy situation for our economy , who ever goes into politics in Malawi should be purely to be the servant for each and every Malawian , not going to enrich themselves.

    I support what the Azungu step have taken , even the countries you want to pattern with , they will still need accountability for every Tambala for their money which you will be given.

  10. Chakwanuleka says:

    We Malawians will take this government seriously when it takes the investigations beyond 2012 back to 2005. We have a nasty feeling a lot happened from 2005 as pointed out by the national audit that MK92 billion could not be supported by proper documentation. details of the querried transactions have been given in which case anyone with serious intentions has a starting point. The country doesnt require another audit as DPP would want us to believe which is their tactic to buy time.

  11. Mika Kumbire says:

    Dr Chinsinga what are you trying to tell us exactly that we already don’t know? Of course it is also obvious that the British Government would not allow the Zero-Aid-Budget to succeed with the help of other countries like China, India, Brazil and Russia. Simple mathematics proves that the Government already managed to run with the lesser budget since the rest of the funds were looted by the PP Government.

    Since the British Government suspends aid anyway no matter which Government is in power; it high time we put down strict controls; not for Aid to be restored but for the development and benefit our people. It is obvious that Aid cannot be relied upon as it discretionary.

    The Western countries will continue fighting us both ways. They will make sure the Zero.Aid.Budget doesn’t succeed since this can prove to be a slap in their face for an African Country to develop. The suspension of Aid is simply a ploy to make sure that an African Country remains behind.

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