The European Union said today it has given the Malawi government an August 30th deadline to hand back at least €8 million it says was diverted from an agreed project.
The EU head of delegation in Malawi, Mr Wiepke van der Goot, said the EU was demanding the refund because it was used for what he termed "ineligible expenditure".
The money was meant for a road construction project but, according to a joint EU/Malawi government audit, was diverted for other unapproved projects or misappropriated.
Mr Van der Goot said his delegation held round-table talks with Malawian government officials who accepted the mistake.
"The conclusions were that certain amounts of money would have to be repaid," he said.
Mr Van der Goot said the EU recognised Malawi's needs but if agreements were not respected: "We will be forced - against our wishes - to delay further budgetary support to Malawi".
Finance minister Mr Friday Jumbe confirmed the EU request for a refund but described it as "normal".
He told journalists that whenever a programme is flaunted donors demand a refund after an audit report and that the government was ready to refund the money.
Humanitarian aid will not be held up as a result. An EU food advisor for Malawi said the EU has approved a 95,000-metric-tonne donation of maize for the poor southern African country, where an estimated three million people face starvation.