Aid to Malawi frozen after 68 are arrested

Malawi President Joyce Banda. Picture: AFP/Getty

The Cashgate scandal erupted after budget director Paul Mphwiyo was shot and seriously wounded outside his home in the capital, Lilongwe, on 13 September.

Since then, dozens of officials have been caught with cash-stuffed envelopes in their car boots and homes. It is feared £155 million has been lost to organised theft from state coffers through bogus procurement payments.

Joyce Banda, elected president in 2012 after the death of her autocratic predecessor Bingu wa Mutharika, was hailed by western donors as an example to other African leaders for her attempts to cut wasteful spending.

She established warm ties with Scotland, which she visited in March to mark the 200th anniversary of the birth of explorer Dr David Livingstone. Then Labour first minister Jack McConnell signed a co-operation agreement with Malawi whenMr Mutharika visited Scotland in November 2005.

During Mrs Banda’s visit, Alex Salmond announced £4.9m of aid for development projects.

Mrs Banda has responded to the scandal by declaring that “no-one”, including her own children, will be shielded if they are involved, and even disbanded her cabinet for investigation.

All her ministers were later re-instated save for two – the finance minister and the justice minister, Ralph Kasambara, who was arrested and charged with attempted murder over the shooting of Mr Mphwiyo, who was said to be on the verge of exposing the scam.

This month, Malawi’s leading donors, who between them provide around 40 per cent of Malawi’s budget, halted the aid they pay direct to the government, saying Cashgate had “seriously dented confidence in its financial management systems”.

Sarah Sanyahumbi, head of the UK’s Department for International Development (DFID), said: “This is not business as usual. As far as we are concerned, the line has been crossed, so you cannot go back to what you had before.”

Last year, the UK spent £117m supporting Malawi and was due to spend £92m in the next year.

Around £17m due for payment was frozen following the UK decision, and DFID said that no further payments would be made until investigations are finalised. An IMF mission to Malawi reported last week that the “massive fraud” would mean Mrs Banda’s government had to tighten its belt. It applauded the move to curtail ministerial travel unless absolutely necessary, but added more savings had to be made.