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Malawi Donor Funding Threatened by Rights, Governance Issues

BLANTYRE, Malawi, Mar 17 2011 (IPS) - Malawi is bracing itself for difficult economic times following a decision by the country’s main donors to withhold financial aid amounting to $400 million. Donors say they are responding to a range of governance and human rights issues in the country.

Almost exactly a year ago, the donor group that operates under the Common Approach to Budget Support (CABS) – which includes the UK government, Germany, the African Development Bank (AfDB), Norway, the European Union and the World Bank, warned Malawi’s government over its handling of prosecution of a homosexual couple who were arrested following their traditional marriage ceremony.

CABS, which provides as much as 80 percent of Malawi’s development budget, has now acted on the issue of minority rights, as well as the continued postponement of local elections and the passing of a law that empowers the government to ban newspapers that publish materials that may not be palatable to the Minister of Information.

“When we talk about human rights, we do not only talk about the majority but also minority groups like the on-going issue of homosexuals which needs to be looked into thoroughly,” Frank Kufwakwandi, head of AfDB in Malawi and chair of CABS said in a statement at the time.

Budget crisis

Economic impact

One impact of the decision by Malawi's major donors to withhold funding in reaction to governance and human rights issues has been to create a shortage of foreign exchange in the country.

Cross-border trader Gladys Pinifolo is frustrated by the battle taking place over her head. Pinifolo says she has been unable to buy foreign currency from the bank for her business travel to South Africa, from where she imports tyres and automobile spare parts.

"It’s been over a month since I started looking for either U.S. dollars or rands but I can’t get hold of enough money to travel. The banks say they do not have enough money and they keep on telling me to wait," Pinifolo told IPS. She says the situation is killing her business.

A persistent shortage of foreign exchange is dogging the country; one noticeable manifestation is a fuel crisis, as the government has been struggling to raise the 25 million dollars needed each month to meet rising fuel demands.

The German government has announced that it is withholding half of its budget support – amounting to 3.5 million dollars – for the current financial year. The country has also suspended its 9.7 million dollars of funding for rural development, in response to delayed local elections: Malawi has been without local councillors since 2005.

The U.S. government’s Millennium Challenge Corporation is withholding a 350 million dollar grant to rehabilitate Malawi’s distressed energy sector, demanding that government respects the rights of minorities and that the media law be repealed.

In addition, Malawi has been refused 561 million dollars which it had asked for from the Round 10 of the Global Fund to Fight AIDS, Tuberculosis and Malaria.

The country’s Minister of Finance, Ken Kandodo, told local media recently that any further funding suspensions by donors may hurt the developmental achievements the country has made.

Serious impacts

Donor aid accounts for 40 percent of Malawi’s national budget and the country could be forced to borrow money to make up the shortfall.

Health rights activists in Malawi have expressed concern over the rejection of the country’s proposal to the Global Fund for the 2011-2016 period, which they say will have a detrimental effect on prevention and treatment programmes.

Malawi has been enjoying a relative economic boom in the last five years with the economy expanding at an average of seven percent, inflation reduced to single digits and interest rates cut from 25 to 13 percent in the last two years.

But now this growth is in jeopardy and Malawi’s relationship with donors is strained. The government, however, does not intend to change course. The Minister of Justice, George Chaponda, told local media that Malawi is a sovereign state and vowed that the country will not bow to pressure from donors.

“We will not change our laws just to please donors. We have our own principles as a country and we will stick to them,” said Chaponda.

Gay marriage immoral

On the subject of gay rights, the government’s sentiments have been echoed by the Malawi Council of Churches (MCC), a grouping of 22 Protestant churches.

Bishop Joseph Bvumbwe, spokesman for MCC, told IPS that the donors’ demands in defence of gay marriages were immoral and that the government should not bow down to such “deceitful and misguided” demands.

“As a church we are on government’s side in saying no to foreign influences which disagree with the country’s culture. We are a God-fearing nation,” said Bvumbwe.

The donor group is equally firm: “As partners and friends, we would like to recall that good governance and respect for human rights – including freedom of expression, observance of democratic principles, and freedom from discrimination – are the foundation upon which our partnership is built,” CABS said in a February statement.

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