Former Malawi official arrested on suspicion of misleading the International Monetary Fund

The former finance minister and former central bank governor of Malawi were arrested on suspicion of misleading the International Monetary Fund on the issue of Southern African countries’ compliance with the rescue plan.

Joseph Mwanamvekha and Dalitso Kabambe served as Minister of Finance and Governor of the Central Bank respectively until last year. They were suspected of “facilitating and planning” forged information about Malawi’s international reserves provided to the International Monetary Fund. The program will end in 2020 , Malawi police said in a statement on Wednesday.

Mwanamvekha and Kabambe served under the leadership of Peter Mutharika, who was replaced as president by Lazarus Chakwera after re-conducting a fraudulent poll called the “Tipp-Ex election” last year because of the way the results were allegedly tampered with.

The Chakwera government last year withdrew from Malawi’s $110 million deferred credit facility negotiated with the International Monetary Fund in 2018 to seek new loans. However, apart from emergency loans during the pandemic, the state has not yet received another bailout in a country plagued by corruption, unsustainable debt and persistent poverty. Last month, protests broke out in the city due to the high cost of living, which increased the pressure on Chuckwera.

The International Monetary Fund stated that Malawi is seeking a new rescue plan that is “more in line with the current government’s development agenda.” The government has pledged to conduct a special audit of the country’s foreign exchange reserves for misreporting.

Abebe Aemro Selassie, director of the IMF’s Africa Department, said in October that the staff of the fund are working with the government to understand “cases of false positives that appeared to have occurred in previous IMF-supported programs”.

“The International Monetary Fund takes cases of misreporting seriously. In this regard, I thank the authorities for their efforts to implement corrective measures,” he added.

Scandals in which countries misreport important information to the International Monetary Fund are not unknown, but they rarely lead to the arrest of former financial officials. This year, the International Monetary Fund’s Board of Directors reviewed inaccuracies in Iraq’s compliance with the 2016 rescue plan.

A senior official of the Malawi Ministry of Justice told the Financial Times that the alleged fraud occurred between 2017 and 2020.

Mwanamvekha and Kabambe are well-known members of the Mutharika Democratic Progressive Party and potential successors to the leader. Mwanamweka previously denied any false statements about financial information during his tenure as minister.

He and Kabambe could not be reached for comment on Wednesday. They have not yet been formally charged or appearing in court. The former ruling party accused the Chakwela government of using anti-corruption investigations to persecute the opposition.

“We don’t want to believe that these arrests were politically motivated and aimed to silence the opposition. If they were political figures, it would be another sad day in the history of this country,” the former ruling party said in a statement.

Mwanamveka also faces doubts for his alleged involvement in the 2015 sale of a state-owned bank to businessmen close to the former ruling party. He denied any wrongdoing.