Why aid money has returned to Malawi

Under the mercurial President Bingu wa Mutharika, Malawi was a country that seemed eager to pick fights with aid donors, the richer countries that supplied up to 40 percent of Malawi’s budget.

In the year before his death, President Mutharika announced that he would defy the International Monetary Fund and continue to provide subsidized seed and fertilizer to Malawian farmers. In parliament, he warned human rights activists that they could face jail time if they insulted him. And on the streets of Lilongwe, he followed through: As protesters called for Mutharika’s removal, Malawian police responded with gunfire, killing 20. It was then that Malawi’s donors cut the country off from international aid.

Today, under President Joyce Banda, Malawi is winning donors back. She has announced legislation that would give full rights of expression to journalists and activists. She sold the $12.9 million presidential jet and fleet of limousines. And donors have responded by starting up aid dollars again.

The most recent win for Malawi is America’s Millennium Challenge Corporation, an independent US foreign aid agency that gives aid to poor countries that make improvements in democratic governance, human rights, and economic reform.

Daniel Yohannes, the chief executive officer of MCC, met President Banda on Thursday, and announced that his organization would reinstate $350 million in grants for hydropower projects in Malawi.

“This is going to bring cheaper energy which is badly needed in the country,” Mr. Yohannes said in a phone interview with the Monitor after his meeting with Ms. Banda. “Malawians are going to benefit tremendously. It’s going to affect 5 million people, and provide up to $2 billion in value to the country’s economy.”

Test case

For experts on foreign aid, Malawi is a test case for the West’s attempt to use aid as a leverage to foster better democratic governance and economic reform in the developing world. It’s an approach that some African nations embrace, while others reject as a painful reminder of the West’s colonial period in Africa. For the latter, the no-questions-asked loans and grants from emerging foreign aid donors like China have become more attractive, and encouraged aid skeptics such as the late President Mutharika – who died in April of natural causes – to fight back.

America was not the only aid donor to cut off Malawi for its authoritarian policies, and it is not the only aid donor to reinstate aid when Banda began to strip away the Bingu baggage.  

Last April, the African Development Bank announced that it was ready to provide $45 million in budget financing for Malawi to help the new president revive the country’s weak economy. Malawi is dependent on one sector, agriculture, for 35 percent of Malawi’s gross domestic product, and 80 percent of its export earnings.

In May, Britain pledged $35 million in economic stabilization programs, and $15.4 million for the country's health sector. Two thirds of the country’s population live in poverty, and one in five is unable to afford even the most basic minimum food requirements, according to the United Nations Development Program.

The role of democratic governance 

Yohannes of the MCC says that the US is committed to supporting democratic governance, and it will continue to use aid dollars as a leverage to encourage better economic policy.

“In order to a member of the MCC family, you have to have the conditions of democratic governance, human rights, and the rule of law,” Yohannes says. “Under the previous president, there were some laws that banned free expression, that were very difficult for civil society. There was a crackdown on the media. So when we suspended Malawi, it was because of the killing of civilian protesters by the police.”

Banda has taken “bold actions to improve Malawi’s human rights environment,” Yohannes adds, and announced economic reforms as well.

While refusing to talk about other donor nations, such as China, which may not be as focused on human rights policy, Yohannes says the goal of his agency “is to reduce poverty. Our goal is to help partner countries to get rid of poverty so that aid is no longer needed.”

Creating the conditions where countries can wean themselves from foreign aid and stand on their own feet requires the use to become “extremely selective,” Yohannes says. “Out of 100 countries that are considered to be poor, we have a relationship with 24.”

“When a country does not abide by the preconditions for an MCC grant, they will be suspended,” Yohannes says. “Now we believe that we have a good relationship with President Banda, and it will benefit Malawians as well as the people of the United States.”