African Development Bank

We are not surprised by Chiluba’s corruption – IMF

August 10, 2002

We are not surprised at the reported high levels of corruption under Chiluba regime, International Monetary Fund (IMF) resident representative Mark Ellyne has said.

In an interview on Wednesday, Ellyne said this was why the IMF has always insisted on the privatisation of the parastatals which were being used in the abuses of state resources. “Privatised companies are unlikely to co-operate in this kind of abuses,” Ellyne said.

“When public enterprises make big losses, they are either subsidised genuinely or funds are being abused.” Ellyne cited examples of the loss of up to US $100 million by the now liquidated Zambia National Oil Company (ZNOC) and the over US $60 million in the cobalt sales. “We have since asked the Auditor General to do some audits on ZNOC,” Ellyne said.

“When a parastatal like ZNOC loses US $100 million you know there is a big problem.” However, Ellyne said the IMF supported the ongoing probe into alleged abuses and corruption on the Chiluba government but cautioned government officials not to ignore their obligations towards achieving their economic targets.

“A lot of the guys at the Ministry of Finance are investigating and I know it does take some time so what needs to be done is to separate the role of those involved in the probe.It is good that a task force has been set up for this,” he said. Ellyne cautioned that the levels of corruption may, however, be found lower than currently perceived looking at the figures that have been given and that there had been these “accusations” for a long time in the past.

“For example the IMF cited the cobalt sales anomalies a long time ago, when you see over US $50 million unaccounted for, you cannot immediately say it’s corruption but you can say something peculiar happened to have left such a big hole while you await a report on the issue,” Ellyne said. “We, however, support what President Mwanawasa is doing.” Ellyne said the cobalt audit had been finalised and was currently with the government who would in turn act on it based on the findings.

However, Ellyne said none of the HIPC (Highly Indebted Poor Countries) funds were diverted to Belgium as indicated by government. Ellyne said the IMF was convinced that their accounting framework can indicate that none of the HIPC funds were stolen.

He said while there was a report from the government indicating that US $7 million of a US $10 million allocation under the HIPC initiative had been diverted from Zambia to Belgium, a scrutiny of the HIPC funds did not confirm this.

“We are convinced that our accounting framework can indicate that HIPC funds were not affected,” Ellyne said. “But that does not mean that US $7 million was taken from elsewhere.” But clarifying the earlier statement by Vice-President Enoch Kavindele to the Parliament about the diversion of the HIPC funds, finance minister Emmanuel Kasonde yesterday said it was simply an attempt to divert the resources to Belgium.

“US $11 came in from the African Development Bank and on the same day instructions were given to remit US $ 7 million,” Kasonde stated in response to the query on the earlier reporter diverted funds. “The Bank of Zambia, however, wanted to know the reasons for the remittance and since no plausible explanation was given, the money was not remitted out of the account.” Vice-President Kavindele had on July 16, in a statement on behlf of President Levy Mwanawasa told Parliament that instruction were given for funds to be channelled to an account called BK in Belgium belonging to Congolese businessman Katebe Katoto who had is alleged to have entered into a botched arms supply deal with the Chiluba government.

Joe Kaunda, The Post (Lusaka), August 10, 2002

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