Revoke CABS foreign aid suspension in Malawi

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Approximately $150 million (USD) in direct foreign aid committed to Malawi has been suspended in reaction to the country’s ‘cashgate’ scandal, where in late 2013, government officials were caught looting public funds estimated to be worth $32 million (USD).

The locked aid comes from the Common Approach to Budget Support (CABS) in Malawi, whose members include the European Commission, the Norwegian Embassy of Malawi, the African Development Bank, and the United Kingdom’s Department of International Development (DFID).  CABS decided that dispensing funds into a dysfunctional financial management system would be irresponsible until it could be proven that the resources would be used for their intended purposes.  Additionally, whereas the majority of the deferred funds were to go to the Malawian government under general budget support, DFID also halted sector budget support contributions of approximately $28 million (USD).  Said one expert, “… DFID’s actions may have huge adverse impacts on the health and education sectors…”

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(Residents of Lilongwe gather and wait for maize from foreign donors. Source: Author)

To make matters worse, a March 11, 2014 meeting between CABS and the Malawian government regarding the possible release of aid was recently postponed.  And while the Malawian government took necessary austerity measures in response to CABS’ action, the truth remains that foreign aid represents 40% of the country’s national budget.  In fact, the last time DFID cut funding in 2011, it directly impacted the public health sector by leading to drug shortages and stock-outs, demoralized doctors, and major lapses in the medicinal supply chain.

Unquestionably, CABS (DFID included) should follow the lead of the International Monetary Fund (IMF), who had also been withholding aid but recently decided to release their funds totaling $20 million (USD).  In doing so, CABS might avoid negatively affecting innocent people (and a public health sector), who should not suffer as a result of their government’s recklessness.

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2 Responses to “Revoke CABS foreign aid suspension in Malawi”

  1. roshinigeorge Says:

    This is a sad example of exactly what critics of foreign aid say–funding gets diverted to military spend, to other projects, and in instances like this, to corrupt governments. Economists like Peter Bauer are known for their criticism of foreign aid as actually hurting the economy of a country and his argument is that aid is the transfer of dollars from the taxpayer from a rich country to the government of the poor country..in other words, the aid doesn’t reach those that need it most (http://object.cato.org/sites/cato.org/files/serials/files/cato-journal/2010/11/cj29n3-1.pdf).
    Critics propose initiatives that actually help a country’s economy grow rather than create the dependency on aid and what often occurs which is corruption or growth in military spend. Having said all that, I actually believe there is a role for foreign aid and there has to be strong measures of accountability, transparency, and a deliberate focus on projects that help build a sustainable economy and health system.

  2. alexandermjenson Says:

    This is such a complicated issue, and thanks Kyle for an great piece on who suffers due to these political decisions: innocent citizens who see programs and services revoked. You do an excellent job pointing out the effect of this policy on Malawi, but I wonder exactly what effect withholding of aid has had on Malawi – I’m sure there are rhetorically powerful examples of ARV care, pediatric vaccine programs etc that have been cut or curtailed as a result of this foreign aid withdrawal.
    One thing I wonder is the perceived political “specter” of corruption, and how that just because money isn’t being used efficiently, it therefore shouldn’t be used at all? This is particularly difficult given that so many budgets rely on foreign aid to make ends meet, and budget in this aid in their service projections on a yearly basis. Thus, one is right to wonder if just because we can prove that 5 or 10% of money is not being used properly, we should let the other 90% go as well, as a “punishment”. Who are we punishing, really?

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