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Volume 737: debated on Monday 21 May 2012


Asked by

To ask Her Majesty’s Government when general budget support for the Government of Malawi will be restored following the changes recently announced in that Government.

My Lords, it is too soon to say if and when general budget support will be restored. However, the UK Government have already agreed to release £10 million in urgent health sector support and a further £20 million in previously agreed funding. The Secretary of State for International Development will discuss Malawi’s further requirements when he visits shortly.

I thank the Minister for that Answer and welcome the support that has already been given by the UK Government to the new Government in Malawi. President Banda has graciously praised the early successes of her predecessor but has taken swift action to rectify some of his mistakes. The new president is very firmly focused on economic management, building better international relations and improving governance in the country. On his forthcoming visit, will the Secretary of State for International Development raise the issue of general budget support from the UK and from the European Union as both sums would make a considerable difference if they were reintroduced before the end of this financial year?

The noble Lord’s involvement in and support for Malawi is well known, as is that of the Scottish Government. We very much welcome the peaceful and constitutional transition following the previous president’s death in April. Early discussions with President Banda, who is the second female head of state in sub-Saharan Africa, have been very encouraging and we look forward to working with her to resolve many of these problems. The noble Lord is absolutely right: she has shown a lot of initiative in moving various areas forward. I am sure that the Government of Malawi will raise with the Secretary of State the issues that the noble Lord has mentioned. The Secretary of State is looking carefully at how best to support Malawi. However, it is one thing to say things; it is another to make sure that certain changes are delivered.

My noble friend will be aware that a step change in economic management and governance standards in Malawi is critical, not just to bring immediate relief to its people through the NGOs on the ground but to secure the release of some $750 million in grant aid, which is currently blocked and is clearly needed in the general budget and elsewhere. Importantly, securing investment to interconnect Malawi and Mozambique’s national grids, for example, which are essential to stabilising Malawi’s industry, must also be considered. What action is DfID taking with resident NGOs, such as World Vision and others, to ramp up financial accountability and good-governance standards in Malawi to ensure that inward investment such as that will start to flow?

My noble friend is quite right to say that these issues need to be addressed, and poor governance is of course the root cause of much poverty. DfID is putting a considerable amount into seeking to address that issue, so that the Government of Malawi can be held to account—not least in the way that they manage their public finances, to which he referred. We are pleased that the new president is now talking to Mozambique about restarting discussions on the energy interconnector, which is encouraging and is important to industry in the area. However, first and foremost, it is important to try to address the economic problems in Malawi. DfID is in constant contact with Malawi, which is also in constant contact with the IMF. An IMF team is there right now.

Is there not common agreement in all quarters of the House that it is essential that our overseas development money is spent efficiently and without corruption? Does the Minister accept that good governance is essential in order for that to be done? Will she therefore make sure that budget support, which is a very important part of good governance, is restored as soon as possible?

The noble Lord is absolutely right that aid money must be used well, and that is why the general budget support was removed. Until we can be certain that the protections are there, it would not make sense to restore budget support. However, money is going in, meanwhile, in terms of development, and the contribution from DfID to Malawi is as great as ever but is channelled through other routes.

Lord West of Spithead: My Lords, I declare an interest as patron of the Chauncy Maples Trust, which is renovating a British-built ship, built in the 19th century, on Lake Malawi to provide healthcare to 120,000 people around the lake who currently receive no healthcare. Malawi is, of course, one of the 10 poorest nations in the world. Half the population earns less than a dollar a day, and this aid is very important. Do we now have a full high commission there to ensure that we are able to monitor things correctly, including money going down the wrong channels, to make sure that money is applied properly to help this country in the way that it needs?

It is indeed extremely important to make sure that that kind of support is in place, and DfID has been supporting healthcare in Malawi very strongly. The noble Lord will be aware that the previous high commissioner was expelled by the former president, but the UK has decided to appoint a new high commissioner—a process that is going through at the moment. Meanwhile, the new president has decided to appoint a new high commissioner to the United Kingdom—and that, we hope, will help.

My Lords, I join the Minister in welcoming the leadership in Malawi of Africa’s second woman president, Her Excellency Joyce Banda. Is it not clear that if economic catastrophe is to be averted in Malawi—a country in which 39% of the population lives on less than a dollar a day—she will need a lot of sustained assistance? In those conditions, will the Government seek not only to encourage donors to release funds for Malawi but to discourage the current IMF mission from any recommendation that would further devalue the currency and therefore inflict potentially ruinous extra inflation on the economy of Malawi?

The noble Baroness is quite right. With these encouraging signs, it is extremely important that President Banda is supported in seeking to deliver these changes. I note that the Bank of England has, for example, sent technical support, as Malawi has just devalued its currency. Therefore, it is in a better situation in some ways but in a very volatile situation in others. International donors and the IMF are acutely aware of the need to provide support in these circumstances and to make sure that the funding is there so that some of the adjustments to the economy can be brought forward and the changes that President Banda has suggested can then be better delivered.