The World Bank has resumed direct budget support to impoverished Malawi with an USD 80- million injection three years after donors pulled out due to a “cashgate” corruption scandal, officials said today. Donors, which provide about 40 per cent of Malawi’s budget, in 2013 pulled the plug on aid of around USD 150 million (110 million euros) after British auditors said at least USD 30 million was stolen from state coffers over a six-month period.
The Bank, a major backer of the southeast African country’s tough economic reforms, had in the past said support would only come if Malawi implemented financial management systems that would stop fraud and massive theft of state funds.
The “cashgate” affair erupted with revelations about funds going missing involving dozens of officials, businessmen and politicians. Four people were jailed.
The scandal led to the withdrawal of aid by numerous countries. It also contributed to the defeat of president Joyce Banda in elections in 2014, won by her rival Peter Mutharika who took office vowing to fight corruption.
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Laura Kullenberg, the Bank’s country manager, said Malawi had “taken some very important reform steps and it is critical to maintain momentum and deepen reforms going forward to move Malawi out of the circle of vulnerability and onto a development path”.
Kullenberg says the USD 80 million “aims to improve incentives for private sector participation in agriculture markets and to strengthen fiscal management through more effective expenditure controls and greater transparency,” according to a statement obtained by AFP.
Agriculture powers the country’s economy and contributes over 40 per cent to Malawi’s GNP.
Malawi President Mutharika was quoted on state television as saying the resumed World Bank support was a “vote of confidence in us and how we are managing our economy.”
“We expect more such news from the European Union, the African Development Bank and others,” he added, adding that Malawi faces numerous economic challenges and was “in desperate need” of more support.