Blantyre , Malawi - Britain's Department for International Development (DFID) Thursday announced that it had indefinitely suspended budget support to Malawi for what British International Development Secretary Andrew Mitchell said was the impoverished southern African country's failure “to address UK concerns over economic management and governance'. “On the economy, the UK is concerned that Malawi’s overvalued exchange rate has created chronic foreign exchange shortages which are having a serious impact on the Malawian private sector’s ability to drive future growth,” said Mitchell in a statement.

'There are now daily fuel queues, tobacco exports have deteriorated and Malawi is off-track with its IMF programme,” he said.

Mitchell said Malawi had also performed poorly on governance with the banning of demonstrations, intimidation of civil society organisations and the enacting of laws that impinge on human rights.

Apart from Great Britain and the IMF, the World Bank, the European Union, the African Development Bank, Germany and Norway have also all suspended budgetary support to Malawi for similar reasons.

Said Mitchell: 'The UK provides development assistance in order to help communities lift themselves out of grinding poverty, whether that’s through getting children into school, ensuring women survive child-birth or helping farmers grow enough food to feed their families and communities. But poor people in Malawi and British taxpayers alike have been let down.'

Mitchell therefore said in these circumstances 'I cannot justify the provision of general budget support for Malawi '.

The British minister, however, said the British government would use other means to ensure that programmes to protect poor Malawians, amongst the poorest people in the world, and deliver basic services like health and education are able to continue.

“The UK has a long and deep commitment to the people of Malawi and we are keen to see the country resume the good progress it has made in recent years,” he said, adding that the British are “willing to re-consider our approach as and when our concerns are addressed.”

Great Britain, Malawi's former colonial masters before independence in 1964, was Malawi's largest aid donor. British money has helped improve food security in Malawi for over seven million people a year by providing them with high yielding maize and legume seeds via the Farm Input Subsidy Programme.

Britain was also involved in the health sector, helping save the lives of over 3,200 pregnant women and 40,000 children since 2004. Over 3,200 primary school classrooms and 4,800 toilets have also been built since 2001 using British money.

This is the latest development since Malawi's relations hit the lowest ebb with the expulsion of British High Commissioner to Malawi, Fegus Cochraine-Dyet, over a leaked diplomatic cable to Foreign Secretary William Hague in which he described President Bingu wa Mutharika as becoming 'increasingly autocratic and intolerant of criticism'.

London retaliated by expelling Lilongwe top diplomat in the UK Charge d'Affaires, Flossie Gomile-Chidyaonga, with Hague warning of 'further consequences'.

Between 2011 and 2015, Great Britain pledged to be giving Malawi 93 million pounds annually, 22 million pounds of which was budget support, the rest being development aid.

But since the Mutharika administration bought a presidential jet in 2009, London slashed the budget support by 3 million pounds annually.

Malawi's 2011/12 national budget is 303bn Malawi Kwacha. According to IMF Country Director Rudy Randall, Malawi's IMF programme is 'off truck' which means IMF cannot give Malawi any money.

This also means all donors cannot give any aid to Malawi because they all follow IMF programme.

At least 40 per cent of Malawi's budget was being bank-rolled by donors until this year when the Mutharika administration was forced to implement what is being called a 'zero deficit' budget, meaning that the entire budget will be funded internally through taxes and other levies.

This has seen the introduction of new taxes and adjustments in existing taxes. Government has also announced austerity measures like the freezing in recruitment of civil servants and cut in foreign travel by the president, ministers and civil servants.

The effects of the suspension of donor aid are already being felt. Malawi is failing to import adequate fuel resulting in long queues at service stations as most service stations are dry. It also hard to get foreign money in banks

Commenting on the development, political analyst Rafiq Hajat of the Blantyre-based think-tank Institute for Policy Interaction said: 'This confirms our worst fears that our lopsided decision to expel the British High Commissioner to Malawi will have consequences. We have to work hard to mend fences with Britain.'

Foreign Affairs Minister Prof. Etta Banda, said recently Lilongwe had engaged London in a dialogue to mend fences.

'We haven't severed ties with Britain,' she said.

Britain's Conservative-led government recently announced it would reduce general budget support across the world by 43% as it tightens the principles on which budget support agreements are made.

Pana 15/07/2011