BOT Bank of Tanzania

In the last few weeks, the Tanzanian government has come under intense pressure from the public, activists and the media to explain why it was quietly recovering money that was misappropriated under the External Payment Arrears (EPA) account operated by Bank of Tanzania (BOT), the country’s central bank (pictured left).

The public demands the release of names of people involved in the scandal and their immediate prosecution. The EPA scandal consists of fraudulent payment of about TSh133 billion ($116 million) made by the Bank of Tanzania to 22 companies in the financial year 2005/06 involving the repayment of the country’s external debt.

As of last week, according to a government pronouncement, nearly half of the money (Tsh 60 billion) had “mysteriously” found its way back into State coffers. The Attorney General and the Inspector General of Police have refused to disclose the names at this stage, pleading for patience because the investigation is still going on.

Speculation has been rife as to why the government would rather recover the loot than prosecute. While others believe the government may be shielding the culprits, the most plausible reason seem to be that the government has figured out that it has a weak case against the culprits in a court of law. It may well be that the EPA contracts the government signed are so weak and with little teeth to enable the prosecution of abusers of the debt servicing vehicle. The worst case scenario will be that the contracts were intentionally weakened by its framers, while eluding the watchful eye of IMF. Therefore, this may yet be another scandal (similar to the mining contracts that later had to be renegotiated), that will expose weaknesses in contract negotiation and contract drafting skills by the country’s State attorneys, and possible corrupt elements within the government who are short-changing public interests.

The scandal has already claimed the Governor of BOT as its first casualty. Daudi Balali was fired by President Kikwete back in January after he was implicated in the investigative reports carried out by Government’s Controller and Auditor General (CAG) and the accounting and audit firm, Ernest & Young. The President has been on an anti-corruption crusade lately. He dissolved his government last month after another multimillion dollar scandal blew up over emergency electricity power supply contract, engulfing his Prime Minister and two cabinet ministers who were subsequently forced to resign.

What are your thoughts? Do you trust the government when it says it is doing the right thing to recover the swindled money and deal with prosecutions down the road?