The World Bank resumes direct budget support to impoverished Malawi

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The World Bank has resumed direct budget support to impoverished Malawi with an $80-million injection three years after donors pulled out due to a “cashgate” corruption scandal, officials said on Saturday.

Donors, which provide about 40 percent of Malawi’s budget, in 2013 pulled the plug on aid of around $150 million (110 million euros) after British auditors said at least $30 million was stolen from state coffers over a six-month period, reports BSS.

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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.

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 $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 reporters.

Agriculture powers the country’s economy and contributes over 40 percent 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.

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