Blantyre - The European Union warned on Thursday that it
will not release scheduled budget finance to aid-dependent Malawi until the
government deals with a widespread multi-million dollar treasury fraud.
The EU is set to release $39m in December to support the
deeply impoverished country's budget, which is bankrolled up to 40% by foreign
But the treasury and the powerful office of President Joyce
Banda have been rocked by a spate of fraud scandals this year in which millions
of dollars have been siphoned from the coffers.
"There is need for a clean-up before we make our
disbursement," Alexander Baum, the head of the EU mission in Malawi, said
in a statement.
In one of the biggest fraud cases ever recorded in the
country, the principal accountant in Banda's office authorised payment of one
billion kwacha ($3m) to a ghost firm, according to the state-appointed
In another case, a junior officer who earns $100 a month was
found with $25 000 cash at his house during a raid by the police.
Ten government employees have been arrested over the past
two weeks for fraud in the so-called Capital Hill cash-gate scandal, named
after the seat of government.
Last month nine senior police officers were jailed to 14
years each for fraud involving $164 000.
Donors are "watching with keen interest and the EU will
make its disbursement of the pledged budgetary support of €29m
depending on how government deals with the crisis". said Baum.
The southern African country's government has vowed to carry
out a forensic audit to ascertain the level of fraud and corruption in the
But the EU is proposing external auditors be hired to do the
job because the auditor general's office cannot be trusted and may not have the
capacity to handle it.
"All this massive looting was happening under the very
nose of the auditor general's office and the malpractice was not detected or
discovered," Baum said.
Meantime around 300 consumer activists on Thursday staged a
peaceful march in the administrative capital Lilongwe demanding
"immediate" action from the president following the record
multi-million dollar fraud unearthed last week.
"We are demanding an independent forensic audit to
check into the plunder and the resignation of the finance minister, the accountant
general and several senior officials from affected government ministries,"
Billy Mayaya, a leading rights activist, told AFP.
Prosecutors estimate that one third of Malawi's revenue is
lost to fraud and ghost workers.
A top treasury official who was on the verge of busting a
corruption ring, was last month shot and seriously wounded by a gunman in what
Banda suspects was a targeted attack to silence him.