Malawi has been forced to come up with austerity measures in order to make up for a huge financial gap after its biggest aid donor suspended its distribution of aid to the country.
The Finance Minister, Ken Kandodo, announced that the country is prepared to make tough decisions on spending cuts after the UK Government’s Department for International Development defended its Malawi aid freeze by stating that “Evidence of the value for money of its spending in Malawi is hard to find.”
Malawi, which is one of the most poverty stricken countries in the world, is expected to lose £47 million every year because of UK’s aid freeze. This move by the British Government is as a result of the diplomatic row between the two countries in April when the British Ambassador in Malawi criticised the leadership of President Bingu wa Mutharika.
Malawi’s Finance Minister provided little detail of the measures he is to introduce later this year although the hole in the country’s budget could endanger a six-year economic boom in Malawi, from which the country has enjoyed seven per cent annual growth.
The UK’s decision to slash aid to Malawi remains controversial as the British Government is to increase its annual foreign aid distribution to 0.7 per cent of its gross national income. Many African countries are among those that will benefit from the policy as Tanzania, Nigeria, Ghana, Ethiopia, Congo and Sudan are all on the top ten list of UK’s foreign aid distribution.
The Bill came as a response to the United Nation’s Millennium Development Goals and it was announced by UK Deputy Prime Minister Nick Clegg that the UK would increase its spending on aid from 0.5 per cent to 0.7 per cent from 2013.
The plan to increase foreign aid distribution has caused recent tension within the UK Government as Defence Secretary Liam Fox challenged the proposal. He claimed that the Bill could “limit Her Majesty’s Government’s ability to change its mind about the pace at which it reaches the target in order to direct more resources toward other activities or programmes rather than aid.”
Barbara Stocking, Chief Executive for Oxfam, a NGO promoting foreign aid, criticised Liam Fox and said: “British aid offers great value to the taxpayer. For little more than a penny in the tax pound we not only help those in need but also boost our standing in the world and increase our influence in the global corridors of power.
She added: “Liam Fox is wrong to question the Government’s approach. Giving legal force to our aid pledge shows we are serious about keeping our promises to the poorest even when times are tough.”
Malawi is not the only country the UK is to stop giving direct development aid. 16 other countries including India and China are to stop receiving aid as the Government says it wants to focus more on the countries that are most in need, such as Ethiopia. As 75 per cent of Malawi’s population is living on less than a dollar a day, it has been argued by the Institute for Development Studies that Malawi should also be a priority.