Jul 2, 2012
Center for Democracy and Civil Society

When Conditional Aid Produces Reform: A Look at Malawi

New Malawi President Joyce Banda

Reform, itself a rather nebulous concept, is sometimes difficult to define in the context of political behavior. It begs the questions, “Reform in what area, for whom, and to what social, political, or economic end?” Many African countries for years, under pressure from international donors, have adopted policy rhetoric infused with promises of western-style “reform” in all the areas one might expect: democratic pluralism, economic liberalization, anti-corruption, institutional development, constitutional protections for human rights, and so on.

Actual progress beyond rhetoric has been slow. But not always for lack of effort from major donors and other international actors. Conditions are often placed on large aid packages that flow to governments in developing countries. The logic is that these conditional packages can be used as both a positive and negative incentive, prompting governments to embark on recommended changes in policy, while also deterring them from more destructive and parochial uses of power due to the explicit threat of losing international funds — which often account for large portions of a developing country’s budget. Predictably, many of these governments — run by powerful elites who may stand to lose under a system of vibrant pluralism and broadly distributed economic growth — nod politely and give credence to the value of reform, but do little else to codify or fundamentally institutionalize real change.

A possible exception may be Malawi. New President Joyce Banda, southern Africa’s first female head of state who rose to power last April after the sudden death of former President Bingu wa Mutharika, has used her brief three months in office to shake up Malawian politics. Some of her actions have been largely symbolic – selling a controversial private jet purchased by her predecessor only two years earlier, to name one example — but others have been more substantive. For better or for worse, she is initiating an austerity campaign throughout the country, headlined by a 40 percent devaluation of the Malawian Kwacha that has since created a minor spike in inflation. But Ms. Banda appears willing to accept the immediate domestic consequences of this campaign in the hope that it will create a more solid economic foundation for growth and also repair relations with donors that were nearly severed in recent years.

Yet Ms. Banda’s surprising behavior isn’t confined to economic policy. In a dramatic break with both her Malawian predecessor and the leadership of the Africa Union, she refused to grant Sudanese President Omar al-Bashir entrance into Malawi for the July AU Summit her government was hosting, on account of his outstanding arrest warrant issued by the International Criminal Court for alleged war crimes in Sudan. Withstanding tremendous pressure from the AU, Sudan, and other countries in the region, Ms. Banda eventually refused to host the summit with Mr. Bashir in attendance, forcing organizers to move the entire event to Ethiopia.

It was quite a remarkable stance for a small country, particularly in a region of much larger countries that have repeatedly avoided or sought to obfuscate their obligations to the ICC, and to human rights more generally. Ms. Banda is likely to incur significant consequences for her uncompromising position, primarily in the form of political or economic alienation by the AU when it negotiates new policies to govern regional trade and commerce.

What is equally clear, however, is that international donors are taking notice of Ms. Banda’s streak of independent and, by their view, necessary political behavior. The Millenium Challenge Corporation (MCC) recently released a $350 million package it had suspended in 2011 after accusing Malawi’s previous president of malfeasance and poor governance. The MCC’s initial freeze was also in response to Sudanese President Bashir’s attendance at a conference in Malawi’s capitol, Lilongwe, last fall. In another significant event, Ms. Banda’s administration released a reconfigured annual budget proposal that built upon the direction set by their previous currency devaluation, prompting the International Monetary Fund to sign off on a $157 million aid agreement.

Movement toward reform, in the areas of human rights and economic policy, can indeed be seen in the recent behavior of Malawi’s government. And the carrot provided by large aid packages, compounded, of course, by Malawi’s own desperate need for economic growth, appears to be the primary motivator behind these changes.

I wrote last week that we should not wait for, nor expect, enlightened leaders to bring altruism into systems otherwise dominated by corruption, identity politics, and the narrow interests of elites. Though Ms. Banda appears determined to challenge this notion, far be it from me to declare her behavior as anything close to altruistic. Time will tell how effective her policies will be, as well as the degree to which she can generate a broader political movement in favor of her approach. But it does seem clear that she, more than her predecessor and many other African leaders, is displaying the courage and foresight to make tough, painful choices at the possible expense of her own domestic favorability. Austerity is likely to hurt many Malawians in the short-run, and her face-off with the more powerful AU may enrage many Malawi politicians who see little political gain in return for possible alienation. Further still, there is no guarantee that international aid will propel Malawi’s economy forward in a sustainable way, since much of its impact will depend upon the incentives of existing institutions and political actors.

Yet years from now, assuming Ms. Banda continues on her current path, Malawi may be an interesting case study to assess the ultimate impact of a leader that goes against powerful regional forces, as well as institutionalized interests, to enact reforms and collect the corresponding aid that those reforms release.

 

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6 Comments

  • Before rushing to crown her the new hope of Africa – a list that includes such leading lights as Robert Mugabe, Yoweri Musevini, and Meles Zenawi – it’s probably a good idea to do a background check on her as well as considering what goals she s trying to pursue and what incentives she faces. I’m not disagreeing with you, Josh. I just think we need to do our homework on her.

  • I completely agree. Many are probably thinking they’ve seen this song and dance before. And it’s certainly too early to make long-term judgments. But her history is an interesting one. Just a couple years ago as vice president she apparently left her own party because she wouldn’t give in to pressure to support a male candidate for president rather than herself. Her pre-political career also included a rare divorce, followed by a business start-up, the creation of the National Association of Business Women, and the Joyce Banda Foundation (a school and nonprofit for disadvantaged youth).

    None of this makes her a savior of sorts. But it might indicate that she is more prone to political independence than others who have held her position before. Though you’re right, in that Malawi’s underlying political system hasn’t changed. She only has 3 months in office, so we may have yet to see how internal incentives will shape her behavior. But so far, external incentives clearly have, and it’s interesting to see how she’s basically given the cold shoulder many entrenched actors in favor of warmer relations with international donors.

  • Now we are getting somewhere. From what you wrote, it seems to me that she is an ambitious politician. Her independence doesn’t allow us to say much about how she intends to wield political power, however. It could be that aligning with donors at this point in time allows her to sideline her political rivals. None of this suggests she is committed to good governance. Musevini did the exact same thing in the late 1980s and early 1990s. When he managed to marginalize all his rivals, the corruption machine to fund his own patronage network took off and governance has deteriorated in Uganda ever since. I think we need to go back to the point you made in a previous post about Kenya. Don’t look for her altruism. Rather, what institutions is she putting in place to institutionalize better governance? What is she doing to constrain her own behavior? Marginalizing opposition doesn’t institutionalize better governance. In fact, a strong opposition is often the catalyst for such changes.

  • Speaking from the ground perspective, there is definitely a feeling of hope and optimism in Malawi about Joyce Banda. I’ve talked with quite a few people from professionals to villagers about how they feel about her as the new president and everyone agrees it is an improvement from the past president. Perhaps this is respectful lip service, but considering that there was some unrest immediately preceding the death of Bingu wa Mutharika, I’d say social acceptance for her corruption-reducing attitude is part of the way forward.

  • I certainly agree thus far she is a major improvement over Mutharika. My simple point is that I have seen such “donor darlings” many times in the past. All of them failed to live up to the expectations outsiders had for them. Certainly, we should support the good work she is doing. What we should not do is have unrealistic expectations of what she can do or will be willing to do to improve governance in Malawi.

  • [...] summer, I posted a short piece about Malawi’s Joyce Banda. Southern Africa’s first female president had only been in [...]

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