In the midst of a bigger issue, some odd wording

The Guardian (via Reuters) is reporting on the demonstrations in Malawi. While the political issues that underly the demonstrations deserve their own post, I noted some odd wording in Reuters’ assessment of Malawi’s recent performance:

The outburst of public anger … was directed mainly at Mutharika, a former World Bank economist who was first elected in 2004 and has presided over six years of high-pace but aid-funded economic growth.

The freeze has left a yawning hole in the budget of a country that has relied on handouts for 40% of its revenues…

If we take this at face value, and assume that Malawi’s economic growth was ‘aid-funded’ (as opposed to aid-accelerated or aid-independent), is this a bad thing? It seems that Reuters is devaluing the economic growth because it has taken advantage of external assistance, but surely if the economic growth effect of aid is greater than the volume of aid, implying some kind of multiplicative effect of aid on growth in Malawi, this is a positive. It tells us that aid can indeed improve economic performance and contribute to growth, something that most aid workers and thinkers are deeply unsure of. The statement on Malawi’s ‘reliance on handouts’ also strikes me as a little disingenuous. A little digging by the staff would have shown them that while 40% of the budget surely constitutes aid dependency, this isn’t particularly high for the region, especially considering that Malawi gets almost all of it’s aid on budget, unlike most of its neighbours, and thus has a more accurate estimate of aid dependency than others countries, for whom estimates are almost universally biased downwards. I have seen incomplete estimates of aid dependency as high as 60%.

It seems to me that of all the criticisms we might wish to make of Malawi and its economic management, turning aid into growth and accurately assessing a not-astronomical aid dependency ratio should be very, very low on the list.

5 thoughts on “In the midst of a bigger issue, some odd wording

  1. Matt

    July 21, 2011 at 4:49pm

    Also strange was the way the article implied that the discontent started after the diplomatic row with the British – while a lot of it has to do with more recent failings, especially the persistence of the fuel crisis, there have been plenty of rumblings in the past few years.

  2. Ranil Dissanayake

    July 21, 2011 at 4:54pm

    Yes – especially since the fuel shortages pre-dated the row with the British by more than a year; and the problems with the peg (and subsequent dollar shortage) have nothing to do with the recent suspension of aid – the situation first came to a head when GBS was suspended a while back for going off-programme. Even after it’s reintroduction, forex was still scarce apparently.

  3. Joey

    July 21, 2011 at 5:01pm

    Nah, I don’t think that the journalist is saying that aid funded growth is a bad thing, but is rather just giving some context to the story. With so much govt revenue coming from aid, and with the UK freezing aid, it will have consequences for economic growth.

    And I think it’s fair to say that 40% of the budget from aid does constitute reliance. If I was getting 40% of my salary from one place, and still spending more than I earned every year, I would say that I was reliant on that source of revenue.

  4. Ranil Dissanayake

    July 21, 2011 at 5:03pm

    Joey – that’s fair enough, if it’s just context. Maybe I misunderstood what the journalist was getting at – or who his/her audience is. The wording struck me as odd, though.

    Re: 40%, it’s reliance, for sure, but my point is that it’s by no means unusual for Southern/Eastern Africa.

  5. MJ

    July 22, 2011 at 7:00am

    Just some lazy, cliche-ridden journo-speak, I suspect, tho I agree with Joey’s point too.

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