Malawi government will have to tighten its financial belt significantly after donors announced on Thursday have put on hold budget support in response to massive financial looting at Capital Hill dubbed as cash-gate.
The donors, including the IMF and World Bank under the Common Approach to Budget Support (CABS) said on Thursday that they are withholding direct budgetary support until investigations on the looting and plundering at Capital Hill are concluded, according to CABS co-chair Sara Sanyahumbi.
“The line has been crossed and there is no going back to business as usual,” said Sanyahumbi.
The development partners agreed to withhold budgetary support until trust and confidence in government financial systems is restored.
The donors are angry over revelations of massive fraud and corruption in government.
Newly appointed Minister of Finance Maxwell Mkwezalamba has admitted that the massive looting of finances at Capital Hill has eroded donor confidence in Malawi.
Mkwezalamba who has pleaded with donors to “soften their hearts” said restoring donor confidence will only happen if all the leakages that allowed the looting of public resources are sealed.
European Union and Norway were the first to put their aid packages on ice in the wake of reports of massive looting in government.
Malawi -which depends on aid for 40% of its national budget – is rocked by the worst fraud scandal in the public service which has reportedly drained over K100 billion (over $250m) of taxpayers’ money through dubious pay-outs to companies that did not provide any goods or services.
A forensic audit team from the United Kingdom has since arrived in Malawi to help government investigate how millions of dollars were pilfered from the system.