From: Yona Maro

For a country heavily reliant on foreign aid since independence, the recent Cashgate scandal has come at a substantial cost, as an estimated $150 million in aid committed to Malawi is now not being disbursed. Following Malawi’s multiparty reforms in 1994, donors have shown greater willingness to withdraw aid if certain conditions for economic and democratic governance are not met. The decision of numerous donors to delay assistance to Malawi in response to the Cashgate scandal is case in point. Beyond the sensational headlines, closer analysis of the scandal reveals political challenges that Malawi faces in its management of public finances, complicated by the effects of foreign aid provision and withdrawal.

Cashgate refers to a corruption scandal in Malawi where government funds have been siphoned through fraudulent payments and loopholes via the country’s Integrated Financial Management Information System (IFMIS) platform. Malawians dubbed the scandal “Cashgate” because the first arrests made were of low-level bureaucrats found with stockpiles of cash in their homes and vehicles. To date, 81 people have been arrested and 35 bank accounts have been frozen. Estimates of funds siphoned during Cashgate range from $20 million to $100 million.

The financial system through which the funds were stolen, IFMIS, has been heralded as an anti-corruption solution. Though there has not yet been a systematic assessment of IFMIS’s impact on corruption, it was expected to have a deterrence effect by increasing risks of detection. But the problem with government spending and budgeting in Malawi is not merely technical – it is also political.

Link:

http://aiddata.org/blog/behind-the-headlines-the-deeper-roots-of-malawis-cashgate-scandal

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