Foreign aid has traditionally accounted for about 40 percent of the national budget
* President Banda says Malawi on right track after IMF reviews
* Banda hopes donors will free funds frozen by graft charges
* IMF says Malawi performance "broadly satisfactory"
By Mabvuto Banda
LILONGWE, Jan 18 (Reuters) - President Joyce Banda said on Saturday that Malawi was on the right track after an economic review by the International Monetary Fund and expressed hopes that donors would release funds frozen over graft allegations.
The IMF on Friday rated the southern African nation's economic performance "broadly satisfactory" after completing its third and fourth reviews under a credit facility, enabling the IMF to disburse around $20 million.
"This decision ... is a signal that we are on the right track and it also boosts donor confidence in what we are doing and hopefully this will unlock frozen funds we desperately need," Banda told Reuters in an interview.
Banda, who took office in April 2012, implemented austerity measures that led to a restoration of a $79 million IMF aid programme suspended due to a conflict with her predecessor Bingu wa Mutharika. She also took a personal pay cut and put Mutharika's presidential jet up for sale.
But recent revelations of corruption led the country's key donors to withhold millions of dollars in budget support and to demand that Banda's administration investigate and prosecute those involved in stealing state funds.
Foreign aid has traditionally accounted for about 40 percent of the national budget.
The scandal, known locally as "cash-gate", forced the government to shut down its payment system last year to investigate allegations that $100 million had been stolen by officials, delaying payment of salaries to teachers, nurses and doctors.
Banda, who faces an election this year, said she had called for a forensic audit backdated to 2005 that would help reveal the extent of corruption in the aid-dependent, impoverished country.
"This is my commitment to fighting corruption," she said. "So far over 81 people have been arrested and 35 bank accounts frozen."
In a statement on Friday, IMF Deputy Managing Director Naoyuki Shinohara said Malawi's macroeconomic performance under the IMF-supported programme has remained "broadly satisfactory."
"To restore confidence in the authorities' management of the economy, it will be important for the government to investigate the fraud thoroughly and to implement the action plan to address the weaknesses in public financial management exposed by the fraud," he said. (Editing by Tosin Sulaiman and Alister Doyle)
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