The outgoing US Ambassador to Malawi Alan Eastham, who leaves the southern African nation on Thursday at the end of his three-year tour of duty, has predicted doom for the country if political leaders do not resolve their feud.

Eastham told a local radio that Malawi may lose millions of dollars in donor aid if the current political stalemate is not resolved.

“The current political situation is not conducive, the country may lose donor aid due to the ongoing political argument that has been there the last three years I have been in the country,” he said.

While expressing optimism that the two warring parties would soon come up with a lasting solution to the crisis, Eastham said most countries would not be happy to continue pouring their aid in a country whose political situation is volatile.

Malawi relies heavily on donor money for its public spending. In the 2008/09 national budget the country is expected to receive about US$640 million (MK90 billion) in aid.

In June this year, the Head of the United Nations mission in Malawi Michael Keating also warned that Malawi may lose donor support if the current political situation remains unchanged.

“If there is no budget in place, donors will have to either reduce aid levels or provide it outside the budget,” Keating told the media.

Malawi’s strong opposition alliance of Malawi Congress Party (MCP) and the United Democratic Front (UDF) has been fighting to have the speaker evoke Section 65 - the law guiding floor crossing of lawmakers - before passing the national budget.

The opposition parties insist that according to the constitution President Bingu Mutharika’s Democratic Progressive Party (DPP) must lose about 70 legislators for crossing the floor.

Last year, similar political crisis also delayed passing of the national budget and it took the intervention of the international community and civil society for the opposition to back down.

Meanwhile, the DPP has put its feet down saying it will not sign the Memorandum of Understanding (MOU) facilitated by the members of the clergy that intends to resolve the continuing political impasse in the country.

Government says the MOU process lacked proper consultation and the DPP government could not be party to such an agreement made by the clergy.

The development has put more blocks to the passing of the budget as the main opposition UDF and MCP have clearly said they would not pass the 2008/09 budget if government refuses to sign the MOU.