IMF approves $18 mln aid to Malawi after commitment to fight corruption

LILONGWE (Reuters) – The International Monetary Fund will provide $18.1 million to Malawi after its government promised to tackle the corruption that led to a suspension of aid by donors following large-scale graft involving public funds.

Donors led by former colonial ruler Britain have withheld direct aid to the southern African nation for more than a year over a corruption scandal in which top government officials and ministers siphoned millions of dollars from the public purse.

The IMF said late on Monday after completing a review of Malawi’s economic performance that government was committed to rebuilding trust in public institutions and bringing the IMF-supported program back on track.

The global lender also said addressing weaknesses in public financial management was key to restoring donor funding.

“Malawi’s macroeconomic outlook and performance under the IMF-supported program was significantly damaged by a large-scale theft of public funds and by policy lapses in the run- up to elections,” the IMF said in a statement.

“The breach of governance resulted in the suspension of budget support from donors, which has led to increased recourse to central bank financing, accumulation of domestic arrears, exchange rate depreciation, and high inflation.”

Finance Minister Goodall Gondwe said he hoped the IMF move would unlock more aid.

“This will sure give confidence to our traditional donors to come in because (lack of aid) is crippling our economy,” Gondwe told Reuters.

Foreign aid has traditionally accounted for about 40 percent of Malawi’s national budget.

The scandal, known locally as “cash-gate”, forced the government to shut down its payment system to investigate allegations that $20 million had been stolen by officials, delaying payment of salaries to teachers, nurses and doctors.

The amount, which had initially been put at $100 million, was revised downward after an audit by a British firm last year.