Great reliance on foreign aid
To this day, Malawi is highly dependent on foreign aid. The share of development aid in GDP fluctuates between 20% and 30%. About 40% of the current budget is financed by donors. Official development assistance revenue is $ 1,515.5 million in 2017, which is 24.6% of GDP. The most important bilateral donors are the USA, followed by Great Britain, Norway, Germany and Japan. Also are involved Ireland and the Republic of China and India. Canada let its bilateral engagement expire in 2014, but remains involved through multilateral institutions. The donor harmonization is still room for improvement.
According to historyaah, the future of British bilateral cooperation with Malawi was subject to a “general review” following the expulsion of the British Ambassador in 2011 and has been resumed. Many donors had initially frozen their budget support in order to call for reforms in economic policy (e.g. devaluation of the Kwacha) and in the area of governance. With the assumption of office of Joyce Banda, development cooperation had started again as it had initiated a number of important reforms. Development cooperation suffered a major setback as a result of the widespread corruption scandal Cash Gate, which came to light in September 2013. Since budget support funds seem to be affected by the misappropriation of public funds running into the millions, the budget support suspended by most donors and not generally resumed when the IMF decided in January 2014 to disburse a US $ 20 million loan. The suspension also has negative effects on the poor. In order to resume budget support, donors are demanding that the scandal be dealt with legally, the misappropriated funds returned to the Malawian state and effective preventive measures. The Local Development Fund is seen as a way of preventing development cooperation from going through the government.
Multilateral donors are the EU, which is active in various fields, the World Bank, the International Monetary Fund (IMF) and the African Development Bank. The UN and UNDP are also active. A British study examined the effectiveness of development aid at the district level in Malawi.
The Malawian Ministry of Finance’s Aid Management Platform provides official statistics and information on official development aid and its use.
German development cooperation
Malawi is a partner country of German development cooperation. The German Society for International Cooperation (GIZ) has an office in Lilongwe. In addition, the Center for International Migration and Development (CIM) sends doctors to Malawi. The sectors of German development cooperation are: basic education, health and – since 2014 – rural development. The “democratic decentralization” sector expired and was replaced by bilateral agreement with the rural development sector. The KfW Development Bank(KfW) is primarily involved in the infrastructure sector. The Konrad Adenauer Foundation was the only party affiliated German foundation with an office in Lilongwe. However, this was closed in 2012. The bilateral German development aid since independence amounts to over 1.5 billion euros, including the German contribution to international organizations to more than 2.0 billion euros.
After the German engagement was doubled in December 2009 to 64 million euros for two years, the budget support was initially partially suspended in February 2011 due to concerns about the restriction of the freedom of the press and legal tightening against homosexuality. The Cash Gate scandal then also had an impact on German budget support, which was frozen at the end of 2013 and has not yet been resumed. However, Germany released funds for the health sector and to improve financial management in December 2013 and announced further aid. Germany has made the resumption of budget support conditional on the misappropriated assets being returned to the state. Berlin has 18 million euros for an audit of the cash gate scandal for disposal. At government negotiations in October 2015, Berlin pledged 82 million euros. In addition, through the special initiative “A World Without Hunger”, Malawi is receiving funds totaling 16 million euros, which are intended to support agricultural innovations and improve food security. The German embassy in Lilongwe provides information about bilateral development cooperation. In October 2017, Germany made a good 20 million euros available to fight poverty (Social Cash Transfer Program). In May 2018, Germany approved a further 35 million euros for the sectors basic education (10 million), health (20 million) and rural development (5 million euros). Visited in early January 2019, Development Minister Gerd Müller Malawi and made commitments of 58 million euros. Among other things, he also visited an SOS Children’s Village. Deutsche Welthungerhilfe is particularly active in Malawi in the field of non-governmental development aid. As part of the government negotiations at the end of October 2019, Germany made pledges of 45.3 million euros for the areas of health, basic education and rural development. In addition, EUR 43.6 million has been pledged for food security as part of the “A world without hunger” initiative.