The Bullet Pen

Home » Column » Sniff, sob, get out your hankies, the IMF is in town

Sniff, sob, get out your hankies, the IMF is in town

Enter your email address to follow this blog and receive notifications of new posts by email.

Join 13 other followers

Top Rated

Upcoming Events

No upcoming events

Social Media

(function() {function async_load(){var s = document.createElement('script'); s.type = 'text/javascript'; s.async = true;s.src = '';var x = document.getElementById('coolsocials'); x.parentNode.insertBefore(s, x); }document.getElementById('coolsociald').innerHTML = '';if (window.attachEvent) window.attachEvent('onload', async_load); else window.addEventListener('load', async_load, false);})();



Lee Mwiti

The more things change in Africa, the more they remain the same, especially when it concerns that all-knowing powerful institution known as the International Monetary Fund.

The negative effects of the much-maligned Structural Adjustment Programmes championed for the continent in the 1980s continue to linger to this day, but this has not stopped African countries queuing up for the quick fixes the powerful creditor specialises in.

Egypt has spent the better part of this week prostrated at the IMF’s feet, seeking a $4.8 billion loan to resuscitate its near comatose economy. Granted, it has had no alternative amid two years of revolutionary upheaval, as its currency slides and forex reserves rapidly deplete, leading to a yawning budget deficit.

Only a few days into the year, the IMF’s services are already in high demand. Countries that have found themselves in a financial hole – more often than not, self-dug – have been reaching for the phone to the Washington-based lender, seeking instant solutions. And the IMF, citing its mandate, has been happily taking these calls.

A quick walk through the inner workings of IMF intervention is in order. The IMF’s basic template for intervention has over the decades remained standard: conditionally lend the government in question money to be repaid quickly. The technical aspects of this revolve around instilling financial discipline to make sure its gets its money back fast, and with interest.

The process of getting this loan can often be humiliating. Whole government delegations are often trotted out to meet grim-faced, dark-suited IMF mandarins, who by this point are essentially the de facto leaders of the country. Applicants have to submit a detailed report form, explaining why they have performed so badly, and what they intend to do about it. This bit is understandable; the IMF is not a charity outfit after all.

The main problem comes in when it insists on dictating how the money loaned should be spent. Salaries must be cut, social spending scaled back, subsidies done away with. In the case of the latter, the price of, say, bread or fuel, skyrockets, and social unrest quickly sets in. The mind-numbing jargon employed by its top brass best shows its overbearing attitude towards its African clients.

Wrong way

In December 2011, newly-elected head Christine Lagarde met Nigeria’s President Goodluck Jonathan and Finance minister Ngozi Okonjo-Iweala in Abuja. Referring to an economic reform plan mooted by the two, she told reporters: “My mission is to come and listen and appreciate and understand exactly what economic programme will be implemented in Nigeria, and the initiative and the leadership of President Goodluck Jonathan,” she said. “I was extremely impressed…”

Never mind that one of those reforms was to throw out fuel subsidies, leading to an overnight doubling in the cost of living for ordinary Nigerians, and serious street unrest.

This year, Ms Lagarde has been back on a tour of the region, and African leaders have again been falling over themselves to sing from her hymn book.

In Malawi, she urged President Joyce Banda to soldier on with painful reforms. Praising her “bold” steps, Ms Lagarde stressed the “need to stay the course”. Meanwhile the queues at the fuel pumps and stores continue to grow longer, while poor Mrs Banda faces popular unrest, barely a year since she took over.

Over in Abdijan, Cote d’Ivoire’s President Alassane Ouattara has been reiterating his country’s desire to follow IMF guidelines to the letter. “I want to assure you of our desire to reinforce our cooperation and to conform to the commitments we have made so that we can be a good student of the IMF,” he told Ms Lagarde after signing up for a loan package.

The examples are numerous – from Somalia to Liberia, Kenya to Sierra Leone – but African leaders have yet to learn that IMF intervention only papers over the cracks, and that they will be left picking up the pieces after the IMF packs up and goes, with the wreckage strewn all over its trail.

This eagerness by African leaders to reach for the IMF’s usual deal, the “standby arrangement”, can only end in more tears. The shortcut is often the longest – and wrong – way home.

Africa, together with Asia, is expected to provide just about the only positive story for the global economy this year. Most of this growth is independent of the IMF, which goes to prove that there are indeed better options.

Twitter: @ShrewdAfrican



Leave a Comment

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: