Malawi's FM: Aid expected to return

2012-04-10 10:50
Lilongwe - Malawi's finance minister expects suspended international aid to be restored under its new president, Joyce Banda, helping prop up a budget increasingly under strain after the previous president picked fights with overseas donors.

Finance Minister Ken Lipenga also told Reuters on Monday that former President Bingu wa Mutharika, who died on Thursday of a heart attack, had blocked plans called for by the International Monetary Fund to devalue the currency because he was worried the move would hurt the poor.

Aid-dependent Malawi slid into economic crisis over the past year as Mutharika, a professorial but temperamental former World Bank economist, squabbled with major western donors who then froze millions of dollars of assistance that had traditionally bankrolled about 40% of the budget.

"I expect the resumption of aid will happen," Lipenga said.

Foreign diplomats showed their support for Banda by visiting her residence even before she had been officially installed, but so far there have been no concrete signs the West is preparing to restart the flow of aid.

The finance minister has not yet discussed economic policy with Banda since she became president but he thinks she will be able to address some issues that raised red flags with donors including suppression of human rights and the media.

"The donors were emphasising the concerns of the Malawi people," he said.

Mutharika plunged the country into isolation last year when he expelled the ambassador from former colonial master and biggest aid donor Britain, who said in a leaked diplomatic cable Mutharika was autocratic and intolerant of criticism.

In a watershed moment for the normally peaceful state known as the "Warm Heart of Africa" Mutharika's police killed 20 people in anti-government protests in July 2011, leading to international condemnation and a cut of aid packages from other donors.


The IMF, which has suspended a $79m aid facility due to conflict with Mutharika, wants to see Malawi's currency, the kwacha, further devalued, saying too much of the state's precious reserves are being used to defend it.

Malawi devalued the kwacha last year to 165 to the dollar from 150. On the black market, the price is nearly double, reaching 295 to the dollar just before Mutharika's death.

On news of his death, the rate dropped to 270-275 with many anticipating an end to a foreign currency crisis that had crippled the economy. As dollars disappeared, fuel prices had soared and foreign goods such as medicine became prohibitively expensive.

Lipenga said the government was poised for another devaluation in September, after he returned from a meeting with the IMF in Washington, but Mutharika blocked it.

"He was very much against devaluation unaccompanied by other measures because he argued it would hurt the poor," Lipenga said.

Malawi was one of the fastest growing economies in the world after Mutharika took office in 2004, averaging 7% expansion between 2005-2010 thanks to internationally funded fertiliser subsidies and seed programmes that turned the nation of subsistence farmers into food exporters.

But the aid cut-off and Mutharika's steadfast ways put the economy on a death spiral.

Lipenga said the economy could return to its fast rate of growth if aid was restored but added the country needed to move away from its biggest cash crop tobacco, which at one point provided up to 80% of its foreign currency, by increasing the strength of its value-added businesses.

"We really need to start generating forex for ourselves," he said.

Read more on:    joyce banda  |  bingu wa mutharika  |  malawi  |  southern africa

Join the conversation! encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

We reserve editorial discretion to decide what will be published.
Read our comments policy for guidelines on contributions.
NEXT ON NEWS24X publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Comments have been closed for this article.

Inside News24


Book flights

Compare, Book, Fly

Traffic Alerts
There are new stories on the homepage. Click here to see them.


Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.

Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire network.


Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.

Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.