Economists Debate Effect of International Financial Crisis on Aid to Malawi | Voice of America - English
Economists in Malawi are watching the global financial storm known as the credit crunch with unease and uncertainty over its possible effects on the country's economy. Malawi is among the world's poorest nations and relies on donor aid for more than 40 percent of its national budget.
Thomas Munthali is an economist with the World Bankin Malawi. He thinks in the short term Malawi may not be affected: "I think for Malawi [this] may [feel like an] impactbecause we are very much [disconnected] from the international financialsystem. But if you are looking at where we have recession hitting globaleconomy, [it's mostly affecting Malawi's] main trading partners. [So] we expectthere to be a reduction in trade and that can affect growth [on the economy] inthe coming year." Munthali dismisses fears that the downturn in theinternational economy will make donors less likely to give aid because ofconcern about their own financial health: "I don't think that there will be a withdrawalof funding by donors. For example this year donors seem to still be verycommitted to financing Malawi and I am sure this should be the case with thewhole of Africa." But he says once the crisis reaches its peak, donorsmay have a change of heart: "Maybe next year when recession kicks in you couldsee the possibility of donors reducing their aid going to Africa becauseessentially the commitment depends on how much the [Western] economies havegrown [or contracted]. So when theeconomies [show little growth] you expect the aid levels to be less." Ephraim Munthali is spokesman for the Ministry ofFinance. He told reporters that donors have not yet given any indication thataid will be reduced as a result of the global situation. He said over the pastfour years Malawi has sustained an average growth rate of more than sevenpercent. That's above the six percent benchmarkconsidered necessary to meaningfully reduce poverty. Statistics indicate that Malawi's GDP growth for 2008has jumped from 7.4 percent to 8.7 percent. Economists attribute this to robustperformance by the agriculture sector, especially the tobacco industry, whichhas registered record high revenue. But an IMF survey in October projected that growthrates in sub-Saharan Africa would slow to 6 percent in 2008 and 2009, 5 percentlower than last year. It says recent global economic turbulence will probablylead to a decline in the flow of private capital, remittances, and aid toAfrica.