The freezing of funds from USAid, the world’s biggest development agency, has sent shock waves through the southern African country of Malawi, one of the world’s most aid-dependent states.
Elon Musk, the US president Donald Trump’s billionaire adviser, last week said he was working to shut down USAid, which disbursed $43.8bn (£35.2bn) globally in 2023. Chaos is reigning in the development sector. Supplies of lifesaving medication and children’s food in many countries have screeched to a halt.
The US government was giving more than $350m (£282m) to Malawi annually, according to the US Department of State, equivalent to more than 13% of the African country’s 2024-25 budget.
More than half of healthcare spending in Malawi comes from foreign donors. Since 2003, the US has put more than $2.1bn (£1.7bn) into fighting HIV/Aids, malaria and tuberculosis. Between 2019 and 2023, foreign donations accounted for 11% of the education budget and 80% of spending on capital projects such as schools and classrooms, according to Unicef. USAid accounted for a quarter of this.
“Developed countries like the US know and appreciate that Malawi is one country that has invested heavily in efforts to eradicate poverty, disease and other socioeconomic ills,” said Malawi’s information minister, Moses Kunkuyu. “But, being a repetitive victim of natural disasters and global economic woes, it is clear that Malawi still needs a hand.”
Immediate impacts include funding for HIV prevention medication being stopped, while university students on US bursaries have been told to find alternative sources of support.
“Malawi is already experiencing some devastating consequences,” said Pemphero Mphamba, a health economics researcher at Kamuzu University of Health Sciences in Blantyre.
She said the economy’s dire state could worsen, pointing to high inflation, which has been above 23% since June 2022 because of repeated currency devaluations amid foreign exchange shortages. “USAid was another source of forex,” Mphamba said.
Last year, GDP per capita in Malawi was just $481, according to the International Monetary Fund and the already weak economy has been battered by repeated climate shocks. Cyclone Freddy killed 679 people and displaced 659,000 in March 2023. Then, last year, Malawi was hit by the worst drought in southern Africa for a century.
The World Bank estimated last month that for the past three years the economy has been growing slower than the population, which is now estimated to be more than 21 million.
The prospects for landlocked Malawi to export its way out of aid dependency look slim. It is dominated by subsistence agriculture and exported just $900m (£725m) of goods in 2022, according to the World Bank’s most recent data. Of those goods, 40% were tobacco.
While growing numbers of tourists have been flocking to the country for its abundant wildlife, soaring mountains and the golden beaches of Lake Malawi, they have not plugged a foreign exchange gap that has led to repeated shortages of fuel and other imports.
“As a country, we have been relying on one source of revenue collection for the longest time and that’s tobacco,” said Victor Chipofya, a political science lecturer at Blantyre International University. “So how does a country sustain itself with a product that globally everybody is campaigning against?”
He estimated several thousand people were working for NGOs and projects funded by USAid: “These were middle-class employed people, and obviously they were spending and they were able to pay taxes, and as a country we would be able to benefit from that … and now these people are unemployed.”
The sudden withdrawal of support could mean the reversal of some of the aid-related gains Malawi has made, said Yvonne Mhango, Africa economist at Bloomberg.
The end of aid dependency was not in sight either, she said: “I don’t think that will happen for a generation … It’s not like it’s got a vibrant stock exchange or debt market or foreign direct investment coming in in a big way, because they don’t have a consumer market.”
There were valid criticisms of aid for not catalysing sustainable, long-term growth, said Christopher Vandome, a senior research fellow at the Chatham House thinktank. “But the immediate reality is that government spending and so many of the government’s social provisions are dependent upon that donor support.”
Additional reporting by Charles Pensulo in Lilongwe
