Recently our donor partners unanimously agreed to suspend budgetary support worthy $150 million to the government following corruption scam, and the IMF followed suit by withholding $20 million citing the same reason. The decision sent a wave of shock to some quarters considering the consequences of donor aid withdrawal on the economy.
Previously, Mutharika administration experienced donor aid freeze after expelling Cochrane Dyet, the former British envoy. The effects were very devastating and detrimental to the economy as the country experienced forex shortage, endless fuel queues, companies retrenched workers, inflation and interest rates skyrocketed, etc, etc.
Foreign aid is the transfer of resources from developed countries to under-developed countries, either through bilateral or multilateral donors. Malawi just like many African countries has been receiving donor aid to eradicate poverty since attaining independence. Donor aid is normally subject to certain conditions, which reflect the motives of the donors as to how much they are sincere to the development and welfare of the developing countries, or pursue their own obvious and clandestine interests.
In Africa foreign aid reached its peak between 1960s and 1990s, but it has dried up due to the fact that donor countries are increasingly focusing on former socialist Europe, including the new Commonwealth Independent States (CIS) which has replaced Soviet Union, and due to the fact that the Cold War is over. Western powers, therefore, no longer need to use foreign aid as a tool to counteract the incursions of the Soviet Union in influencing African nations. However, studies have shown that some foreign aid donors have provided aid with the sole objective of having influence on the recipient countries. They refer to this as conditionality-based foreign aid.
According to the World Bank (2003) report which examines foreign aid dispensed to Africa, 11 countries (Canada, Denmark, France, Germany, Italy, Japan, Netherlands, Sweden, Switzerland, UK and USA) have been outlined as principal donors between 1996 and 2001. Over this period only Japan, UK and USA slightly increased their aid flow while the rest of the donor countries diminished their aid dispensation. Aggregately, donor aid declined from 0.25% to 0.22% of the donor countries’ Gross National Product (GNP).