When we announced an inquiry into the situation in Malawi, one of our main reasons for doing so was that DFID had recently suspended general budget support to Malawi (the provision of funds directly to the Exchequer). Additionally, the UK High Commissioner had been expelled from Malawi for criticising the then President, Bingu wa Mutharika (though the Malawian Government subsequently indicated it would welcome the appointment of a replacement). Given these circumstances, we were concerned about DFID's capacity to deliver its programme.
The suspension of general budget support was a response to the performance of the Malawian Government: the then President, Bingu wa Mutharika, had become increasingly autocratic, whilst also presiding over an economic crisis. His decision to peg the Malawian kwacha to the US dollar had led the currency to become dramatically overvalued, with consequent shortages of fuel and foreign exchange. His relationship with his Vice- President, Joyce Banda, had deteriorated significantly: whilst constitutionally unable to remove her from her post, he expelled her from his Democratic Progressive Party.
Whilst it suspended general budget support, DFID continued to support poor Malawians, both through sector budget support (the provision of funds to specific ministries) and by working through NGOs. We support this course of action. We also think the Government was right to delay re-appointment of a High Commissioner, as to re-appoint would have sent out the wrong signals.
President Mutharika died of a heart attack in April 2012, and was replaced by his estranged Vice-President. President Banda has swiftly begun to reverse her predecessor's policies, and the UK's relationship with the Malawian Government has improved significantly. The focus of our inquiry has changed to reflect this: as well as assessing DFID's performance during the Mutharika era, we have also considered how DFID can best respond to the newly changed circumstances in Malawi.
The Government announced its intention to re-appoint a High Commissioner in late April, whilst DFID has brought forward £30 million of bilateral aid (not 'new' funding, but an earlier-than-planned disbursement of already-allocated funds). This included £10 million of sector budget support for the health sector. We agree with this.
DFID is now considering whether to re-instate its programme of general budget support to Malawi. Subject to the continuing progress of economic reforms in Malawi, we support re-instatement. Given President Banda's commitment to reform, general budget support is likely to be the most effective way of providing support to Malawi. We also welcome DFID's willingness to assist with the strengthening of democratic institutions in Malawi. If general budget support is reinstated, this work may help to minimise the risk of it being suspended again.
Our Report concludes with an assessment of the various sectors which DFID Malawi supports. On social protection, we urge DFID to provide funding for cash transfers in Malawi, since the current refusal to support them is inconsistent with DFID policies elsewhere. On agriculture, we believe DFID is right to support the Malawian Government's Farm Input Subsidy Programme (FISP): this programme, developed by the Mutharika administration, has played a major role in reducing food insecurity. We also comment on DFID's work in water and sanitation, wealth creation, education and health.