Sweden resumes aid

In a vote of confidence in the Malawi government, Sweden has broken a four-year aid freeze and provided about US $5.5 million in budget support.

"Malawi has made considerable progress on macroeconomic stabilisation and maintaining control of public expenditure," noted the Swedish International Development Cooperation (SIDA). It also welcomed the government's "strong anticorruption stance".

In 2001 the International Monetary Fund (IMF) and major Western governments, including Sweden, barred budget support for Malawi as a result of government overspending - up to 80 percent of Malawi's development budget is provided by donors.

SIDA, along with the British Department for International Development (DFID), Norway and the European Commission (EC), provide financial support to Malawi under the Common Approach to Budget Support (CABS).

Sweden decided to resume aid after a CABS review in March found that Malawi had made progress in controlling public expenditure. The review also noted the possible resumption of a Poverty Reduction and Growth Facility (PRGF) - the IMF's concessional loan scheme to poor countries.

DFID expects to contribute $38 million towards the 2005/06 budget, "subject to continued good macroeconomic and fiscal management, and support for progress towards the [UN's] Millennium Development Goals".

The EC is expected to release about $17 million if the PRGF is approved, and another $27.4 million for the 2005/06 budget.

Norway, which withheld support early last year because of deviations from the approved budget, also resumed aid later in 2004. The Norwegian government released $3.5 million in February this year and will disburse another $6 million for 2005/06.