What Africa Wants from the IMF

Reproduced with a permission of International Herald TribuneAs the international community gathers in Prague for the Annual Meetings of the IMF and World Bank, enormous energy is being focused on the efforts to secure debt relief for the heavily indebted poor countries, most of which are in Africa. The onus is now on creditors to live up to their stated monetary commitments, and debtors to demonstrate that the freed-up resources will be used to reduce poverty and prevent slippage back into “debt traps.” As the representative of 24 Sub-Saharan countries on the IMF’s Executive Board, I would like to bring some clarification to the debate.Africa is sometimes unfairly regarded as an undifferentiated entity. In fact, the continent is politically and economically diverse. Democracy is taking root in many countries, as evidenced by more open elections and an increasingly free press. Governance issues are no longer taboo as public scrutiny of government actions increases. Many countries have pursued market-oriented policies, trying to create an environment conducive to growth. In this respect, huge opportunities exist for both Africa and international partners, as illustrated by the privatization programs implemented by the vast majority of African countries.Africa knows full well that debt relief and foreign aid are no panacea; access to additional financial resources is equally critical. But promises of deeper, faster, and broader debt relief form a critical part of the new approach to poverty reduction. Moreover, Africa recognizes that it has a window of opportunity now to lay the groundwork for integration into the increasingly globalized economy.However, while they see undeniable opportunities in globalization, many African countries also recognize the implied risks. It is necessary to create the conditions for these countries to compete internationally with well-prepared economies. With this goal in mind, many African countries are carrying out structural and institutional reforms. These reforms aim to promote the rule of law, to streamline government and the public sector, and to encourage private initiative. They also aim to set the conditions for cheaper and better production in order to enhance competitiveness. In this context, more focus has been given to economic and financial regionalization to gain critical mass, attract foreign investors and mobilize much needed capital.This was the essence of the message that Africa gave the new Managing Director of the IMF, Horst Köhler, when he visited the continent this summer to hear first-hand the concerns and aspirations of Africa’s people.Another key message he heard was that the IMF must stay engaged in Africa-a view shared by many in the debate over how to reform the international financial institutions, a debate we welcome. But it is also a view not shared by several vocal critics, some of whom have made proposals that show a fundamental misreading of what Africa hopes to gain from IMF membership.Some of these critics want to take the IMF out of the “development” business. For example, the highly-publicized Meltzer Commission majority report advocates closing down the IMF’s concessional loan facility-the Poverty Reduction and Growth Facility (PRGF)-and stopping any long-term lending operations in Africa and other poor countries. It wants the IMF to confine itself to very short-term, emergency lending to emerging market countries meeting certain conditions. It would leave development finance to the World Bank and other multilateral development banks.This idea would leave Africa high and dry-in effect, cutting it off from a significant portion of international official finance and gutting programs aimed at boosting living standards and eliminating poverty. Ironically, this occurs at a time when Africa is finally beginning to turn the corner: after decades of decline, incomes are edging up.What does Africa want from the IMF? First, it looks to the IMF for advice on sound macroeconomic policies, without which efforts to reduce poverty would be doomed to fail. Growth is an important source of poverty reduction and a vital generator of revenue for basic social services. It is fueled by sound policies; namely those that promote low inflation, realistic and stable exchange rates, and reasonable fiscal burdens. All this is why 30 African Heads of State and Government, meeting in Libreville, Gabon, in January 2000, committed themselves to integrate poverty reduction with sound macroeconomic policies, with the help of their development partners.Second, the IMF is the right institution to give this advice, for it alone has the mandate, expertise, and experience to do so and to support macroeconomic stabilization and reform with a package deal of advice, technical assistance, loans, and debt relief. The advice is given in the context of the IMF’s annual consultations with all its member governments. But PRGF-supported programs go an important step further, linking poverty reduction to debt alleviation; providing concessional loans to facilitate growth and reduce poverty; and signaling the IMF’s confidence in a member’s policies.Third, Africa looks to the IMF to serve as a catalyst for other financing. This “green light” lets other aid providers and the private sector know that the country is adopting sound economic policies, and thus that conditions are appropriate for investment and aid flows.Fourth, the IMF record, contrary to many critics, is one of promoting economic progress. A recent review found that reform programs supported by IMF concessional loans have led to a marked turnaround in growth. Indeed, statistics show that per capita incomes in countries implementing these programs have been rising roughly twice as rapidly as in other countries. Moreover, social spending need not suffer. An IMF survey of 66 low-income countries in IMF-supported programs during 1985-98 found that education and health care spending rose an average of 2.1 percent a year in real per capita terms-hand-in-hand, on average, with better social indicators.Thus, the answer for Africa is not to tell the IMF to take a hands-off approach, but to find ways to improve its effectiveness, which is exactly what is happening. In spite of armed conflicts and some shortcomings in economic management, Africa has worked far too hard to have its efforts undone by short-sighted, misguided proposals. Let us not turn the IMF into a club for the elite-this would be contrary to the spirit of inclusion and global cooperation that was the very basis of the founding of the IMF.******Alexandre Barro Chambrier is an Executive Director of the International Monetary Fund representing 24 African countries. He is from Gabon.

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