OPENING REMARKS BY Dr.

Maxwell Mkwezalamba Minister of Finance

On the Occasion of Official Opening of the Second CABS Review Meeting for 2013/14 Fiscal Year

Bingu International Conference Centre Lilongwe, Malawi

March 25, 2014

Your Excellency Alexander Baum, EU Ambassador and Head of EU Delegation in Malawi, and CABS Group Chairperson Honourable Ministers and Deputy Ministers Your Excellencies Ambassadors and Heads of Mission Representatives of Regional and International Organizations Mrs. Hawa Ndilowe, Chief Secretary to Government Mr. Charles Chuka, Governor of the Reserve Bank of Malawi Mr. Anthony Kamanga, Attorney General Mr. Newby Kumwembe, Secretary to the Treasury Principal Secretaries, Senior Government Officials and Heads of Constitutional Bodies Members of the Press, Distinguished Ladies and Gentlemen

On behalf of the Malawi Government and indeed on my own behalf, I wish to welcome you all to the Second CABS Review meeting for 2013/14 fiscal year. In this regard, I would like to thank you all for having spared time in your very busy schedules to attend this important meeting. I acknowledge the presence of a number of my Cabinet colleagues, Hon. Fahad Assani, Minister of Justice and Constitutional Affairs; Hon. Ephraim Mganda Chiume, Minister of Foreign Affairs and International Cooperation; Hon. Ralph Jooma, Minister of Economic Planning and Development; Hon. Brown James Mpinganjira, Minister of Information and Civic Education; Hon. Dr. Chris Daza, Minister responsible for Good Governance in the Office of the President and Cabinet; and Hon. Dr. Cornelius Mwalwanda, Deputy Minister of Finance. Your presence, Honourable Ministers, is clear testimony of the commitment of Her Excellency Dr. Joyce Banda, President of the Republic of Malawi, to ensuring that our partnership with the CABS Group is a success. Please join me in saluting Her Excellency the President, who wishes this Review meeting fruitful and successful deliberations, for her commitment and that of her Government. In preparing for this meeting, we have all worked hard in ensuring adequate preparations for a successful Review Meeting. I recall that we, jointly, had to postpone the holding of the meeting from March 11 to ensure that the preparations were solid, sound and adequate. Unfortunately, this was misunderstood by some quarters in our society, with newspaper head-lines such as Donors Hang Malawi and Malawians Should Brave for Hard Times - MCCCI. Despite what others might have wrongly construed from our joint decision to postpone the Review Meeting to a later date, I am glad that we have finally reached our destination. We have been able to work diligently together to ensure excellent preparations. In this regard, I wish to thank and commend you all for this. I take the opportunity to specifically thank Ambassador Alexander Baum, EU Ambassador and Head of the EU Delegation in Malawi and the current CABS Chairperson for the excellent collaboration with us in preparing for this meeting. I also wish to sincerely thank Her Excellency the President, Dr. Joyce Banda, for her leadership and guidance and my Cabinet colleagues for always being readily available to support the process. Of course, I will fail in my duties if I do not mention those in the engine room, the committed and hard working technical team led by the Chief Secretary to the Government with the support of the Secretary to the Treasury.

Honourable Ministers, Excellencies, Distinguished Ladies and Gentlemen The CABS Review Meeting of November 2013 was held against a backdrop of fraud and theft of public funds in Government. These events did not help our cause in receiving budget support and most of you our partners responded by withholding budget aid. Since the last Review Meeting, several commendable actions have been implemented by the Malawi Government, some with the support of the Development Partners, to strengthen Public Finance Management and restore confidence of the Citizenry and Development Partners. The Leadership of the Government of Malawi has worked had in fighting fraud and corruption at all levels and has had serious commitment to ensure that matters of fraud and corruption do not find their way again on the map of Malawi. Thus, in a space of four months since our last Review Meeting held in November last year, we have hope and confidence that it is possible to have sound Public Finance Management Systems in Malawi. We have hope and confidence that we can fight fraud, theft and corruption in Malawi and make them history. It is important to mention at the outset that the Government of Malawi believes in dealing with matters of fraud, theft and corruption in a holistic manner. As such, it has not confined itself only to the period from April to September 2013 but also to the earlier period. This is because there have been some revelations that there also could have been cases of public finance mismanagement in the period preceding the recent discovery of theft of public financial resources. I am, therefore, delighted that we are meeting again today, in line with our Joint Cooperation Framework, to deliberate on matters of mutual interest in relation to our. Partnership. As we meet today, however, there might be expectations that a major decision will be taken on the resumption of the delayed general budget support. But while this Review Meeting is critical, we realize that individual

Development Partners will make their own assessments on this matter. We are also aware that there are Development Partners that are reviewing their positions on General Budget Support not only for Malawi but for other countries as well and we look forward to their reaching early conclusions on this crucial matter. Please allow me to preface my statement this morning by taking stock of what the Government has been able to achieve since September 2013 when it uncovered the looting of public financial resources at Capital Hill.

Malawi Government Action Plan: In the face of the crisis in public financial management, the Government of Malawi set for itself an ambitious program to rebuild and strengthen its Public Finance Management System. In this regard, the Malawi Government Action Plan to Address Weaknesses in Public Finance Management was developed and adopted by the Government. The Action Plan covers five main areas of Investigations and Prosecutions, Accounting, Auditing, Administrative Reforms and Legal Reforms. Its implementation is being monitored by a Ministerial Committee, which meets on a weekly basis, comprising the Minister of Finance (Chairperson); the Minister of Industry and Trade; the Minister of Justice and Constitutional Affairs; the Minister of Foreign Affairs and International Cooperation; the Minister of Economic Planning and Development; the Minister of Information and Civic Education; and the Minister responsible for Good Governance in the Office of the President and Cabinet. The Committee is supported by a Technical Committee led by the Chief Secretary to Government with the support of the Secretary to the Treasury. Development Partners are invited to the meetings of the Committee and there are regular public briefings. With the technical and financial support of the Development Partners, the Committee has been able to ensure that significant progress is made on implementation of actions in the five key areas of the Malawi Government Action Plan. For instance, with the support of Irish Aid, the Government has been able to have consultants to have an independent monitoring and evaluation of the implementations of the Malawi Government Action Plan. In order to support the strengthening of our Public Finance Management, the International Monetary Fund has fielded a Technical Assistance mission with the objective of assessing the status of our Public Finance Management Reforms and proposing a strategy for implementation in the coming two three years. The African Development Bank, the World Bank, the European Union and Germany have committed to provide financial resources for supporting the strengthening of our Public Finance and Economic Management Reform Program. And Development Partners such as Norway and the United States have provided support to assist with investigations and prosecutions. On behalf of the Malawi Government and indeed on my own behalf, I take this opportunity to thank all the Development Partners for supporting the implementation of the Malawi Government Action Plan and the implementation of Malawis Public Finance and Economic Management Reform Program.

Extra-Ordinary Performance Assessment Framework: Since the last CABS Review Meeting, the Government and the Development Partners agreed to develop and sign on to an Extra-Ordinary Performance Assessment Framework (EPAF) to be implemented by the Government. I am pleased to report that significant progress has been made in implementing it. Our Review Meeting will have the opportunity to discuss the E-PAF and we look forward to these discussions, which will not only assess where we are in terms of implementing it but also the future course of actions to be taken to ensure a strong and robust Public Finance Management System. January 17. 2014 International Monetary Fund (IMF) Board Meeting: On January 17, 2014, the IMF Board completed the third and fourth reviews of the implementation of Malawis economic program being supported by the IMFs Extended Credit Facility (ECF) Arrangement. The completion of the two reviews was an important signal that Malawi was on course to implementing sound and prudent macro-economic and structural reform policies in the wake of the recent revelations of public finance management. Currently, the IMF mission is in the country conducting the fifth review of the economic program. We are aware that under the CABS, approval by the IMF of the implementation of Malawis economic program being supported by the ECF is necessary though not sufficient for the release of general budget support by the Development Partners. As Government, we are aware that each Development Partner will ultimately decide whether resumption of budget support is warranted. But among the key factors guiding their decisions, however, should include whether the countrys IMF supported economic program is in place. We hope that this can therefore receive the weight it deserves by the Development Partners. Preliminary Forensic Audit Report: As we are all aware, with the support of the Department of International Development of the United Kingdom (DfID), the Malawi Government through the Auditor General commissioned a Preliminary Forensic Audit upon revelations of the theft of public financial resources. The Forensic Auditors, Baker Tilly of the United Kingdom, have since submitted the narrative part of their report and are in the process of submitting case files to Law Enforcement Agencies through the Auditor General. The Government has publicized the Preliminary Forensic Audit Report, including through submission to Parliament, and it has developed an action plan, which will be integrated in the Malawi

Government Action Plan, for implementation. While thanking the United Kingdom for the timely support, we sincerely hope that the Development Partners will support Government efforts aimed at implementing the recommendations of the Forensic Audit Report, some of which the Government is already implementing. Honourable Ministers, Excellencies, Distinguished Ladies and Gentlemen Implementation of the 2013/14 Budget: Following the decision of the Development Partners to suspend general budget support, the Malawi Government revised its budget framework for 2013/14. The Revised Budget Framework was considered and approved by Cabinet in November last year. It was accompanied by a number of expenditure control and domestic revenue enhancing measures which are currently being implemented. It also assumed that general budget support, at least for some of the Development Partners, would be realized in the third and fourth quarters of this 2013/14 fiscal year. I am pleased that our agenda for today includes the implementation of the Revised 2013/14 Budget Framework. It is our sincere hope that in discussing its implementation, we will be mindful of the importance of ensuring that the delayed budget support is disbursed within the fiscal year. This will go a long way in supporting Government efforts in ensuring successful implementation of the framework. Of course, we acknowledge that a number of the Development Partners have lived to the commitment made at the last CABS Review Meeting to continue to support the Government but not through utilization of Government systems. While this is highly appreciated, general budget support remains our preferred option as it assists us with budget planning and implementation Macro-Economic Situation: The implementation of prudent fiscal and tight monetary policies in Malawi, particularly after the revelations of the looting of public financial resources has started reaping dividends. The macro-economic situation is fast stabilizing as evident from falling inflation and interest rates and restoration of some stability in the exchange rate. Economic growth performance has also been more than satisfactory. Moving forward, we aim to restore macro-economic stability in line with the Government objective. Restoring and maintain macro-economic stability, however, will also depend on how we commit to deliver on our Partnership.

Formulation of the 2014/2015 Budget: Moving forward, the Malawi Government has already embarked on preparations for the 2014/15 Budget. We, therefore, call upon the Development Partners to make their financial commitments for the 2014/15 Budget and probably beyond in good time in line with our agreement in the E-PAF and the principles of Paris, Accra and Busan relating to predictability and effective development cooperation. In conclusion, on behalf of the Malawi Government, I once again thank you all for making it to this important CABS Review Meeting. Since I am aware that this is probably the last CABS Review Meeting for Ambassador Baum, who will be concluding his tour of duty to Malawi this year, perhaps this is a good opportunity to acknowledge his tremendous contribution to our Partnership and Malawi, in general, and so to wish him great success in his next assignment. Ambassador Baum. I thank you all for your kind attention. sd Zikomo kwambiri