UK call to aid Malawi's economy

 
Malawi's President Joyce Banda Banda is the first female leader in Malawi

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Britain is calling for urgent action to prevent a Greece-style financial crisis in Malawi, one of the world's poorest countries, where recent political turmoil, a suspension of foreign aid, and an abrupt currency devaluation have conspired to leave the new government with a gaping hole in its budget.

"Malawi is at a crossroads today and action in three to six months may be too late," said Andrew Mitchell, UK Secretary of State for Development.

The UK was among those which suspended direct aid to the government last year.

Now it is scrambling to bring forward some £30m ($47m) - not due to be handed to the Malawian treasury until later in the year - in the next few weeks, and is urging other donors to do the same.

"We need a lot of support, very quickly - in the region of $500m," acknowledged Joyce Banda, Malawi's new president, who grappled her way to power last month after her predecessor Bingu wa Mutharika died of a heart attack and his aides briefly attempted to subvert the constitution to keep her from taking over.

"Look at me - I'm not panicking," said President Banda, in an interview at State House in Lilongwe.

She argued that much of the cash has already been pledged by foreign donors, then suspended last year because of the increasingly autocratic behaviour of her predecessor, and could be released to Malawi swiftly once the IMF gives her new government's economic programme its blessing.

"We have moved quickly. The situation was self-made therefore things can be corrected - and the good thing is that we know what to do," said President Banda, pointing out how swiftly her team has moved to restore diplomatic relations with Britain, and to invite the IMF back to Malawi.

The 33% currency devaluation - although widely recommended by economists - has put huge strain on the treasury, and on many ordinary Malawians, as the price of imported goods has soared.

Privately, western diplomats here are warning of the possibility of economic collapse, and a backlash against President Banda, if the situation isn't handled firmly and fast.

"An inflationary spiral is a real threat - if the economy collapses, Banda will lose support and political instability could follow. The cost of rescuing Malawi will be much more expensive than supporting it now," said one diplomat, speaking on condition of anonymity.

 
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    Comment number 23.

    International aid is sorely needed in Malawi. I agree with Mbugwile in that it is a temporary fix. Malawi needs to be economically independent producing enought food for all her people, and needs to be a catalyst for business development for new industries. I would hope aid agencies would seek to educate, train, and empower Malawians to be self-sufficient and not play the donor without an ending

  • rate this
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    Comment number 22.

    It is good to see President Banda taking all necessary steps to revive the economy and put Malawi back on the path to democracy. Donors can assist the country by providing aid in a timely manner.

  • rate this
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    Comment number 21.

    I'm I the only seeing what I see? There's a story about President Banda talking about lifting the ban on gays. Last year PM Cameron said aid will be liked to gay rights. Now the UK's call to lift the aid blockade is appearing at the same time as the President's call to lift the blockade on gays. And the two articles are appearing on the British Broadcasting Corp's webpage. What;s the connection?

  • rate this
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    Comment number 20.

    What's bad is Malawi's penchant for corruption, not NGO's and not foreign aid. Malawi has been desperately homophobic, as well, which hurts Malawi's own citizens in their thousands and violates basic human rights. Hurray for Pres. Banda !! It's about time !!

  • rate this
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    Comment number 19.

    The only people jumping for joy in Malawi today are the aid addicted NGOs. These are the people who were urging the late president to change Malawi's policies to please the aid donors. These people were so desperate for aid that they were willing to do anything that the aid donors asked them.

    I can tell them for nothing that devaluation isn't going to fix the economy. It's a temporary fix.

 

Comments 5 of 23

 

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