Saturday, 21 May 2011

Malawi faces austerity as donors withdraw support

Malawi's Finance Minister on Friday announced that the country would introduce austerity measures this year, as the withdrawal of aid by major donors is likely to substantially reduce the amount available for government spending. The British Government has suspended it's 22 million pound budget support. Germany has also withdrawn support from the Malawian government and is rumoured to be closing down its diplomatic mission to the country within the next year. Both countries have expressed concern over freedom of the press, accountability and human rights abuses.

Britain has also suspended the courtesy VIP Visa service usually offered to leaders of friendly states, raising the stakes in the diplomatic battle that has raged ever since Malawi expelled the British High Commissioner for describing President Bingu wa Mutharika as autocratic.

Malawi depends on aid for 40% of its national budget and Britain is its largest bilateral donor. Without this aid, it remains to be seen whether the country will be able to maintain the fertilizer subsidy programme on which the agricultural sector has been dependent, especially in the face of decreasing global demand for key export product, tobacco.

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