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Why aid money has returned to Malawi

Aid donors, such as the US Millennium Challenge Corporation, have reinstated aid projects that had been suspended because of authoritarian policies of Malawi's previous leader.

By Scott BaldaufStaff writer / July 12, 2012



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.

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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.

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