Malawi faces power cuts as US freezes $350m aid

The United States, Britain and others warned Mr Mutharika's government, which depends for about 40 per cent of its budget on aid, after attacks by security forces killed 19 protesters earlier this month.

More than 250 people appeared in courts across Malawi yesterday to face charges in connection with the protests. Officials said more than 500 people were arrested during the unrest.

The Millennium Challenge Corporation, a US agency that assists countries demonstrating good governance, had signed a five-year, $350m agreement with Malawi in April.

But yesterday it said: "MCC is deeply concerned by recent events in Malawi and is placing an immediate hold on all programme operations in order to review its partnership with Malawi, including whether to recommend whether to suspend or terminate its assistance."

The aid was aimed at improving its dilapidated electricity grid. Only 7 per cent of Malawians have access to electricity, with the rest reliant on charcoal and firewood. Government officials say power cuts cost the economy an estimated $16 million a year in lost production.

Malawi's public utility in June warned consumers to expect blackouts until the end of the year as it planned to take about a quarter of the total output off-line for repairs of power plants.

"Since paraffin and fuel in general are scarce, we are going back to candles. This time forever. God help us," said Spencer Katawa, a Blantyre resident.

Since Mr Mutharika, a former World Bank economist, came to power in 2004, Malawi's economy has grown by nearly 10 per cent every year, due mainly to a UK-funded fertiliser subsidy scheme that boosted maize harvests. But even during the boom years, when sales of tobacco, its main export, were holding up, Malawi faced a shortage of foreign exchange, putting strain on its currency, the kwacha, which is pegged at 150 to the dollar.

That has intensified this year as Mr Mutharika has picked a fight with donors, including former colonial master Britain. Malawi expelled the British ambassador over a leaked cable that referred to Mr Mutharika as "autocratic and intolerant of criticism". London then expelled Malawi's representative and suspended aid worth $550m.