The freezing of funds from USAid, has sent shock waves through Malawi, one of the world’s most aid-dependent states.
Elon Musk, US president Donald Trump’s billionaire adviser, last week said he was working to shut down the world’s largest international development agency, which disbursed $43.8 billion globally in 2023.
Supplies of lifesaving medication and children’s food in many countries have screeched to a halt following the pause on US aid.
The US government was giving more than $350m to Malawi annually, according to the US Department of State. This represents more than 13 percent of the 2024/25 Budget of the recipient country, where over half of healthcare spending comes from foreign donors.
Since 2003, the US has put more than $2.1 billion into fighting HIV and Aids, malaria and tuberculosis.
Between 2019 and 2023, foreign donations accounted for 11 percent of the education budget and 80 percent of spending on capital projects such as schools, according to Unicef. USAid accounted for a quarter of this.
“Developed countries like the US know and appreciate that Malawi is one country that has invested heavily in efforts to eradicate poverty, disease and other socioeconomic ills,” said Malawi’s Minister of Information and Degitalisation Moses Kunkuyu. “But, being a repetitive victim of natural disasters and global economic woes, it is clear that Malawi still needs a hand.”
Immediately, US funding for HIV prevention and medication has been stopped while university students on US bursaries have been told to find alternative funders.
“Malawi is already experiencing some devastating consequences,” said health economics researcher Pemphero Mphamba, from Kamuzu University of Health Sciences.
She said the economy’s dire state could worsen, with high inflation estimated above 23 percent since June 2022 following steep currency devaluations amid foreign exchange shortages.
“USAid was another source of forex,” Mphamba said.
Last year, Malawi’s GDP per capita was just $481, according to the International Monetary Fund.
The fragile economy has been battered by repeated climate shocks, including Cyclone Freddy which killed 679 people and displaced 659 000 in 2023.
Last year, the country was hit by the worst drought in southern Africa for a century.
The World Bank estimates that for the past three years, the economy has been growing slower than the population, now estimated at over 21 million.
The country’s prospects to export its way out of aid dependency look slim.
It is dominated by subsistence agriculture and exported just $900 million of goods in 2022, according to the World Bank.
Of those goods, tobacco totalled 40 percent.
While growing numbers of tourists have been flocking, they have not plugged a forex gap that has sparked shortages of fuel, medicine and other imports.
“As a country, we have been relying on one source of revenue collection for the longest time and that’s tobacco,” said political scientist Victor Chipofya, from Blantyre International University. “So how does a country sustain itself with a product that globally everybody is campaigning against?”
He estimated several thousand people were working for NGOs and projects funded by USAid.
“These were middle-class employees and obviously they were spending and they were able to pay taxes. As a country, we were benefitting from that … and now these people are unemployed.”
The sudden withdrawal of US support could undo some of the aid-related gains Malawi has made, said Yvonne Mhango, Africa economist at Bloomberg.
The end of aid dependency was not in sight either, she said.
“I don’t think that will happen for a generation,” said Mhango “It’s not like it’s got a vibrant stock exchange or debt market or foreign direct investment coming in in a big way because they don’t have a consumer market.”
There were valid criticisms of aid for not catalysing sustainable, long-term growth, said Chatham House research fellow Christopher Vandome.
“But the immediate reality is that government spending and so many of the government’s social provisions are dependent upon that donor support,” he said.—Guardian.co.uk
