Problems with the donors

An International Monetary Fund (IMF) mission met the Malawian government this week to discuss the country's deepening economic problems. Earlier this year, Britain suspended aid to the southern African country citing government over-expenditure and the lack of fiscal discipline.

The British government reiterated in Lilongwe last week that it would continue to withhold at least US $18.6 million until the IMF approved the country's macro-economic policy.

British Financial Secretary to the Treasury, Paul Boateng said that despite the British government's commitment to development aid, a number of areas needed to be clarified to ensure that funds are delivered to the people in need. Britain is the country's largest single donor of development aid.

"We want Malawi to be back on track on macro-economic targets. We have to be satisfied with the mechanisms in place for sufficient control of budget expenditure which will benefit the poor," Boateng told a news conference.

Malawi's new Finance Minister, Friday Jumbe recently conceded that the national budget was off-track with a ballooning US $45 million deficit. Jumbe attributed the deficit to weak revenue, overspending and rising inflation rates.

Jumbe, however, encouraged donors to stick to their aid pledges and go beyond the Highly Indebted Poor Countries (HIPC) programme.

"It is our plea that donors must behave practically. Yes, they are willing to make the pledges, but their promises to the poor must be fulfilled, otherwise if we see trickles, like we have seen, then we will not get anywhere," said Jumbe

The HIPC scheme is designed to help the poorest, most heavily indebted countries escape from unsustainable debt by building the policy and institutional foundations for development and poverty reduction.

Relations between Malawi and Britain soured last year when the Malawian government purchased 39 new luxury vehicles for cabinet ministers. Britain, who forced the Malawian government to resell the vehicles accused the government of misusing development aid.

The Malawi government maintained that the vehicles were purchased to replace an old fleet which has become too expensive to maintain.

The British-Malawian debacle was followed by a diplomatic row with Denmark earlier this year. Denmark announced in January the withdrawal of aid to Malawi citing corruption, political intolerance and judicial interference.

"In Malawi political developments continue to move in a negative direction and for this reason both development and environmental assistance will be radically reduced in 2002 and finally phased out in 2003," read a statement issued by the Royal Danish Embassy in Malawi.

The Danish government, through its development agency, DANIDA has since 1997 been assisting Malawi in the areas of health, education, governance, economy and environment to the tune of US $27.8m in annual grants.

However, the Malawi government has defiantly said that Denmark is withdrawing its aid to Malawi because of its economic difficulties at home.

But local commentators have attributed the withdrawal of aid to Malawi to a diplomatic row that ensued between Malawi and Denmark after Lilongwe threw a Danish ambassador out of the country late last year.

"The decision by Denmark will affect us drastically. I think the decision was taken out of anger. The action would bring a dark hour for the non-governmental organisations in Malawi. Denmark was one of the most reliable donors to the NGOs in this country," Ted Nandolo, Executive Director of the NGO Council in Malawi was quoted as saying.

Denmark has also taken similar action against Eritrea and Zimbabwe owing to suppression of the opposition and media in the two countries, while Burkina Faso, Uganda, Kenya and Egypt have met a similar fate due to alleged human rights abuses.

Recent debt sustainability analysis estimate Malawi's external debt at US $2.6 billion.

Official figures indicate that about 65 percent of 11 million Malawians live below the poverty line. A UNDP 2001 Human Development Index ranked Malawi 74 out of 90 countries on a human poverty index.