The International Monetary Fund (IMF) is ditching its prescriptive fund disbursement method for a quicker, country-specific process.
The new programme dubbed the Rapid Credit Line, is expected to provide less conditionalities and ease access to funds at lower interest rates, giving African economies a shot in the arm and strengthening their resilience against economic crises.
"The new rapid credit lines will allow less developed countries to access stabilisation funds which have fewer intrusive conditionality terms, a zero interest rate and tailor made for a specific country's needs to ensure immediate access to the fund", said Dominique Strauss-Kahn, the managing director of the IMF, while addressing a public forum at the University of Nairobi.
The IMF's change of tack is meant to ensure African countries which have been the victims of the global crisis do not suffer unnecessarily. This is done by giving them a window to cushion their economies from the adverse effects of the crisis.
Under the new rapid credit line, the IMF has disbursed a total of $3.6 billion which is three times its previous disbursement.
Mr Strauss-Kahn reckoned that Africa economies have suffered disproportionately despite not being directly responsible for the global crisis.
The effects exposed Africa's highly vulnerable economies to dislocation through collapse of commodity prices, demand and dependency on remittances.
Mr Strauss-Kahn pointed out that remittances have declined, trade receipts dropped and tourist traffic plunged as markets in the West cut back on spending to conserve the little cash available.
However, he noted that African economies are on their way to recovery and are expected to rejuvenate faster than Europe and the US.
"African economies are expected to show strong recovery from the global crisis by registering an estimated 4.5 per cent growth as commodity prices rise and the effect of the crisis wears out", said Mr Strauss-Kahn.
He singled out African economies for having managed the global crisis much better due to stable inflation, a pro-longed period of growth prior to the crisis and appropriate fiscal policies.
The IMF has been criticized for the delay in release of funds already pledged by use of stiffer conditionalities.
In addition, the use of uniform conditionalities across various economies is seen as a failure to appreciate economic differences and the need for tailor made solutions.
"The use of one-fit-all conditionalities is a major failure by IMF to appreciate the differences between economies which then leads to a failure of its programme", said Prime Minister Raila Odinga.
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In referring to a "Rapid Credit Line," this article confuses the Rapid Credit Facility (RCF), a new program which succeeds the rapid-access component of the Exogenous Shocks Facility, with other IMF programs. Strauss-Kahn spoke yesterday about the RCF, but it should not be inferred that the RCF would become the new standard option for African countries seeking IMF assistance. It is designed for countries with short-term problems brought on by either external factors (e.g. drought, the recent global financial crisis) or internal ones (inflation, currency values). The amounts of the loans are relatively small. What is pretty new is that there are very few conditions attached -- this was the case with Kenya's loan last year under the ESF rapid-access option. The RCF has not made any loans yet so far as I am aware, but it only came into existence in the last few months.
The author may have been thinking of the Flexible Credit Line, inaugurated last year, which provides very large amounts of credit to countries judged to be high performers. Eligibility for the FCL is very tight -- only 3 countries have requested and qualified (Mexico, Poland, Colombia). It is unlikely that any African country would qualify.
On the whole, the RCF could be a useful program for some African countries, though they should still exercise caution about any conditions the IMF may seek to impose, and guard against a "slippery slope" into more full-blown IMF programs. Ethiopia, for example, went from an ESF rapid-access loan in Feb 2009 to a full-blown program in less than a year.
Soren Ambrose ActionAid International (Nairobi)
AFRICA; PLEASE BE REMINDED THAT YOUR PEOPLE COUNT A LOT IN ANY OR EVERY SECTORS, AREANS THAT YOU WILL BE DEALING BY WITH THESE EVIL EXTERNAL FORCES. IT IS TIME TO TELL THE WHOLE WILD WORLD THAT ALL THE LIES THAT THEY CAST UPON AFRICA IS NOTHING BUT A MYTHE !!!! AFRICA, YOU MUST SHINE !!