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Africa: Will the New IMF Programme Help Or Hurt Africa's Chances of Meeting Poverty Goals
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The Namibian (Windhoek)
28 April 2008
Posted to the web 28 April 2008
Windhoek
Under fire from both rich and poor countries for its strict policies, the International Monetary Fund (IMF) launched a new programme, called a Policy Support Instrument (PSI) in 2005, as a "non-financial mechanism."
Unlike other IMF programmes, it does not give direct financing.
Instead countries get IMF advice, monitoring and, if all goes well, its seal of approval.
Six countries, all of them African, have signed on so far.
But some, including Mozambique, are already finding that PSIs, like their predecessors, are making it difficult to finance improved education and other internationally agreed Millennium Development Goals (MDGs).
"It is basically a standard IMF programme without the loans, but with the usual 'structural adjustment' provisions," argues Soren Ambrose of the Kenya-based NGO, Solidarity Africa Network.
If a PSI country fails to attain IMF certification, he adds, the consequences can be serious.
"When the IMF cuts a country off, other lending agencies generally do the same.
It is this 'gatekeeper' function, rather than the IMF's loans, that give it its greatest power."
Cape Verde, Nigeria, Tanzania, Senegal and Uganda in addition to Mozambique have signed on to PSIs.
Access to cheap loans Most countries in sub-Saharan Africa began implementing IMF- and World Bank-led structural adjustment programmes during the lean years of the 1980s.
The programmes expanded the role of the market and reduced the role of the state in economic affairs.
They required governments to cut public spending for education and health care, sell state-owned enterprises to private buyers and open markets to foreign goods.
"African governments had to give up control over their economic decisions in order to qualify for World Bank and IMF loans," notes Africa Action, a US-based NGO.
One of the main reasons for countries to sign on to a PSI after "graduating" from an earlier IMF programmes is that the Fund's endorsement makes it easier and cheaper to borrow on international money markets.
Ghana decided not to renew its existing IMF agreement and is currently negotiating a PSI.
It has run out of other options for World Bank and IMF grants and low-interest loans but now needs to borrow some US$750m from private lenders for infrastructure projects.
The IMF believes this investment will help raise Ghana's economic growth to 8,5 per cent a year and put it on track to middle-income status.
Ghanaian officials considered a PSI after finding the conditions of the earlier IMF loan to be "onerous and excessive".
Conditions are one of the most controversial aspects of IMF and World Bank lending.
Critics often claim that the institutions do not pay adequate attention to how the conditions affect people's lives or the contradictory ways in which multiple conditions interact with each other.
Many governments also say that the conditions prevent them from making decisions which should rightly be made by elected leaders and that they also fail to address the basic problems that hinder economic development.
Conditions, but no cash On average, poor countries have to meet 67 conditions on every World Bank loan, according to Eurodad, a network of European NGOs.
Some loans come with as many as 200 conditions, as was the case with a grant made by the World Bank to Uganda in 2005.
Since the 1990's, the IMF has begun to set more conditions, some of them outside the Fund's traditional areas of monetary and fiscal policy, affecting trade, pricing, marketing, public sector management, agriculture and energy, and governance -- an area it had not claimed expertise.
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After Tanzania signed a PSI, the East African newspaper noted that "even without receiving IMF funds, the country will still be subject to IMF conditions."
The PSI is "very much tailored to what the countries wanted," says Patricia Alonso-Gamo of the IMF's Policy Development and Review Department.
"They said 'we want something that is endorsed by the Fund's Executive Board, and we can tell the world we have strong policies.' So it was very much demand-driven."
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