IMF delays aid to Malawi

President Muluzi's liberalisation had been praised by the IMF

The International Monetary Fund (IMF) has delayed the release of new money to Malawi, blaming the government's failure to account for where funds were being spent.

About 70% of the population is near starvation

Only an initial $8m (£5.6m) of a $55m poverty reduction and growth programme has been paid out to the southern African country, a local representative of the IMF said.

The decision comes despite a declared state of national disaster in the country because of widespread famine which has affected 70% of the population.

In a written statement, the IMF representative to Malawi, Girma Begashaw, said the money was withheld because the government had not complied with the agreed transparency conditions to receive the money.

New programme

"Now the government will need to bring the programme back on track by implementing the agreed macroeconomic and structural reform measures so that disbursements can resume," said Mr Begashaw.

Finance minister Friday Jumbe said he was preparing strict budgetary controls to win back donor confidence.

The IMF's decision comes after it praised Malawi's financial sector liberalisation in February.

"Financial sector reforms in Malawi are advanced and efforts to build an effective regulatory framework continue," said the IMF's Policy Development and Review Department.

Donors suspend aid

In November last year, a leaked memorandum from the finance ministry to President Bakili Muluzi said four donors, including the US and the EU, had suspended aid citing widespread corruption and economic mismanagement.

The EU not only suspended the release of $13m but also demanded a refund of $6m already spent.

The US Government, through the US Agency for International Development (USAID), also diverted most of a $7m package meant for Malawi, after the government suspended its privatisation programme.

The IMF's financial sector report in February said citizens would "continue to bear the cost of financial liberalisation in Malawi for a long time to come."