The group said in a statement that Ms. Banda has taken “clear steps” to improve the human rights environment and ensure that laws and institutions in Malawi support democratic rights and processes.
Ms. Banda became president in April following the death of President Bingu wa Mutharika, who critics said had become intolerant of dissent in his final years. Nineteen people were killed in the anti-government protests last July that led to the suspension of U.S. aid.
The suspension, which coincided with aid freezes from other international donors, was economically painful for Malawi, which depends on foreign aid for up to 40 percent of its budget.
Since taking power, President Banda has pledged to improve relations with Britain, which withdrew its envoy to Malawi during a diplomatic dispute with Mr. Mutharika, and donors such as the European Union and International Monetary Fund.
In announcing the restoration of aid on Thursday, the MCC said Malawi “has taken decisive action to restore democratic accountability, to demonstrate respect for the rights of individuals, and to implement sound economic management.” It also praised the “resumption of sound economic policy.”
The MCC funnels U.S. aid to countries with records of good governance and respect for human rights.