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The IMF in Africa - Scapegoat or immediate cause of the problems Africa is facing?

Florian Kitt

Table of Contents

I. Introduction
II. The IMF’s Activities and its involvement in Africa
III. Empirical data for four African countries undertaking structural adjustments: Uganda, Zambia, Zimbabwe, Zaire/DRC
IV. Criticisms of the IMF’s role contrasted with each countries internal situation
V. Assessment and External Factors
VI. Conclusion

I. Introduction

The role of the International Monetary Fund (IMF or the Fund) in Sub-Saharan Africa (SSA) is a highly controversial issue. Since the late 70s, Africa is undertaking structural adjustment programs (SAPs) supported by IMF loans. But so far, SSA failed to achieve considerable economic progress. In aggregate terms it experienced economic regress. Economic development is far from taking place, and poverty, diseases and malnutrition spread. Critics claim that a major factor for this was the Fund and its conditionality. It is claimed that national sovereignty is violated and that SSA is re-colonised by the Fund. Others see it as a debt collector for Western banks and governments. All in all, the Fund’s policies are said to worsen the situation making SSA poorer and more dependent than it has been before.

This essay doubts that this is the full truth. Moreover, in some way the Fund here is used to cushion the failures of others. In order to explain and understand why SSA did not improve its position additional factors have to be taken into account. A focus on the IMF and structural adjustment alone is too narrow. Thus, it is simplified to say the Fund was involved and failed to bring economic growth and better living standards for all. For proper analysis one has to analyse the domestic situation as well.

The discussion starts off with a short introduction to the IMF in regard to Africa. The next chapter examines the socio-economic factors in four case studies over the period of adjustment. After that, the criticisms of civil society and Fund critics are analysed and complemented by an analysis of the domestic political situation in each case. Following, a short discussion of external factors, the global structure in which SSA is situated, completes the analysis. The conclusion connects the analysed factors in order to judge the Fund’s role in SSA. The main argument of the article is that one cannot blame the Fund singularly for Africa’s severe socio-economic downturn since the 1980s (“the lost decade”), but has to deconstruct the situation including the domestic situation in SSA countries, as well as the structure of the global environment.

II. The IMF’s activities and its involvement in Africa

The Fund is a multilateral institution with nearly universal membership of 182 nation states. Its original task was to serve as a co-operative forum for the monetary and financial policies of its members within the Bretton Woods system of stable exchange rates. Up to the end of this system (1945-1971), in which the Fund had restricted control rights over the exchange rates of all members, the IMF mainly served as a think tank, collecting the data of its members and providing them with advice. This ended after 1971 when the US unilaterally retreated from the Bretton Woods system. And, since the late 1970s it has become heavily engaged in lending activities to developing countries with balance of payments deficits. These were largely attributable to the two oil crises (1973/73, 1978/79) and the still unsolved debt crisis.[1] The Fund in this context enlarged its mandate providing long- to medium-term assistance to oil importing developing countries, as opposed to its original task to provide members with balance of payments difficulties with liquidity on a short-term base. The Fund was truly the last lender, as the credit worthiness of Third World countries on private markets had been swept away with the confidence shock of the Latin American debt crisis. It stepped in bailing out the creditors and was the co-ordinating organ in restructuring the debt acting as a mediator between debtors and creditors (London and Paris Club)[2].

The money for these supportive actions is being taken from the accounts of member states.[3] Every country joining the IMF pays a certain amount of money, called quota, which also determines drawing rights and voting power of a country in the Fund. The quota is dependent on economic factors, such as the size of the economy and national income. Therefore the Fund is very much captured by the industrialised states. The G-10 has approximately 48% of the total voting power, and the US with 17% is able to block every major decision. The situation in day-to-day decision making is even worse for the developing countries as they are comprised in groups and never have an Executive Director of their own.[4] The users of the Fund clearly do not have a voice in it.

But every member can draw on the finances of the Fund.[5] The amount of money a member is eligible to borrow depends on its quota and on the category of the arrangement.

The Fund’s lending arm is divided into four sections: Regular, emergency, special and adjustment facilities. For each section, different criteria apply, and the amount of money and time frame vary. As this essay focuses on Africa, it will deal only with adjustment facilities, of which the ESAF[6] is by far the most important, although stand-by-arrangements (SBA) will also be mentioned. The crucial point is the conditionality attached to loans to African countries.[7]

The idea behind adjustment is to restructure the economy of the respective country towards a market oriented economy, where payments deficits are avoided by lower state intervention. The state can then concentrate on its core mandate to provide the economy and its people with the basic frame for successful development.

The ESAF was established in 1987, as successor of the SAF[8], and has currently a total asset base of 10 billion SDRs[9]. All countries belonging to the International Development Organisation are eligible. Over a time spectrum of three years, countries can draw up to 190-255% of their quota, whereas repayments are to happen within 5-10 years with charges of 0.5% interest. In 1998 ESAF has been replaced by the PRGF[10].

The central issue of debate is by no means the facilities but the conditions attached to them. A country first has to state in a letter of intent -that was negotiated between the Fund and the member state before- which adjustments it is going to undertake with the loan.[11] In order to get the first tranche, it has to fulfil certain preconditions (e.g. currency devaluation),[12] as the Fund wants to secure at least a certain leverage, which vains as soon as the money has changed hands.[13] Although the conditions can vary on a country to country base, a general set of requirements can be identified. These are: a reduction of the public sector, wage freezes, currency devaluation, trade liberalisation, privatisation of public enterprises, interest rate regulation, liberalisation of financial markets (especially open door policies to foreign investment), budget cuts, export promotion, general deflation and labour market reform. Another point is the provision of reliable legal frameworks.[14]

The IMF regularly reviews the success of a program and the degree to which the conditions are implemented trying to evaluate the progress of the program.

III. Empirical data for four structurally adjusted countries: Uganda, Zambia, Zimbabwe, Zaire/Congo

In theory the concept of adjustment seems quite adequate. A member country with deep structural difficulties, a balance of payments deficit and most often the need to re-build and -structure its economy borrows money from the Fund at very favourable interest rates. Following, the Fund negotiates conditions with the country to restructure and adjust the economy in order to correct the macro-economic fundamentals. This should lead to a growing economy promoting employment and better living standards should enabling a country to repay its debt.[15]

But looking at Africa, the picture looks slightly different. For more than two decades, the situation even deteriorated. Between 1973-80 the annual per capita growth stagnated at 0.1%, while it fell between 1980-92 by 0.8% on average. Africa today is the centre of the “poverty belt”. Only five out of 31 SSA countries were able to achieve positive growth rates in the last two decades. The middle-income countries in SSA have a GDP of less than $600 per capita while many are even under $400.[16] Furthermore SSA’s world market share in commodity exports and manufacturing declined drastically. From 1980 to 1995 the export share fell from 3 to 1.1% and imports decreased from 3.1 to 1.5%. Value added manufacturing plummeted, and infant mortality rates are increasing while life expectancy is declining. Additionally, foreign investment is also going down. The export base therefore still rests on primary commodities (92%) with a major concentration on agriculture (76%).[17]

This brief overview seems to show that all aid programs[18] failed to live up to their expectations. Especially structural adjustment programs (SAPs) failed to develop this part of the world.

Before assessing the critics of SAPs leading to a broader discussion, a deeper look at specific SSA countries undertaking SAPs might first of all help to get a more concrete picture.

a)      Uganda[19]

Having had two SAPs between 1971-86, which both collapsed due to internal pressure, Uganda, under Museveni’s “non-party-system” negotiated a loan in the context of a SAF program in 1987. In 1989, Uganda undertook its first ESAF that was followed by three others until 1999 and is still part of a SAP under PRGF that lasts until 2002.[20]

When Uganda negotiated its first SAP in 1986, the country was shaken by the autocratic and cleptocratic governments of Milton Obote and Idi Amin[21] and by the civil war that resulted from the fight for power in the country. Per capita income was among the lowest in the world, a revenue for public expenditures was near to non-existence (coffee taxation made the bulk of public revenue; coffee realises 87% of Ugandan export earnings). Furthermore, high inflation (2000% in 1987) and literally no chances to borrow externally made public expenditure fall enormously, while public employment had expanded and wages had fallen to levels one could not live of. A witness describes the situation in 1986 as an unimaginable disaster. Markets were empty, traffic on the streets not existent, shops that had mostly belonged to the Indian[22] business community were ruined and closed. The whole country had been plundered and ruined.[23]

In this light, Uganda’s performance under SAPs up to 1997 is seen as satisfactory. The main goals of the programs were reached. GDP per capita increased by 40%, while public expenditure doubled and military expenditure dropped from 2.4% to 1.3% of GDP,[24] providing a sustainable scope for rising social budgets resulting in growing numbers of vaccines and medicaments. Unfortunately these developments were offset by faster price rises in the health sector than average price rises in the economy.[25] Enrolment numbers for education declined, despite an increase in spending on educational services and the introduction of Universal Primary Education (UPE), and despite the fact that the IMF did approve budgetary provisions for food, agriculture supplies, medical needs, transport and so on.[26] Although the per capita income increased overall, large gaps between urban and rural income developed, which had been nearly equal, on a low level, at the start of the SAP.[27] While the urban ratio increased by ca. 60% the rural one stagnated by around 4%. Hence, a substantial number of rural households remained poor, while urban poverty was successfully diminished. But rural incomes were and are not equally distributed. The regions near to the urban centres show a substantially better performance than the wider periphery. This is due to two criteria. First, people could work in the cities. Secondly, people could sell their products directly since the infrastructure is better, which reduced transportation costs for persons and goods considerably.

In summary, Uganda’s experience has so far been quite successful in achieving stabilisation and growth through deflation and liberalisation. The transformation of the economy from subsistence to market orientation made major steps. Inflation fell from 2505 to ca. 8%. The SAP of 1994-97 for the first time did not even require a supplemental stabilisation program injecting money into social services. Moreover the huge inefficient public apparatus was cut, public wages rose and the military sector was reduced[28]. Following, investor confidence and foreign direct investment (FDI) increased. However, this took until 1997, as investors feared the government would not stick to its official strategy, as happened so often.[29]

Nevertheless, a rise in investment is still crucial to bring the economy on a sustainable base. Obstacles here are the remaining imprudent banking system not recognising e.g. the need for adequate capital reserves and Uganda’s major reliance on foreign aid.

In spring 2000, Uganda’s request for a debt relief under the HIPC[30] campaign of the IMF in accordance with the G-7 was approved.[31]

b)      Zambia[32]

Fund lending played a role in Zambia much earlier than in Uganda. Between 1976-86 there had been already five SBAs carried through and one extended arrangement, which all had structural adjustment as an objective. Only the last two, however, were concerned with the limited implementation of standard tools of IMF adjustment, such as liberalisation of exchange, and interest rates and prices. In 1986, these adjustments were reversed, and the program collapsed. As a result, the conditions worsened. GDP declined drastically (by one fourth), while the debt and budget deficit rose to new heights. Therefore, the Kaunda government negotiated with the IMF again. A program was set up to end administrative controls in the economy. In general, the aim was to build a diversified market oriented economy. The economic performance during these years was a catastrophe. Real wages as well as health and education provision deteriorated heavily.

After the Kaunda government had been defeated in the 1991 elections, the new Chiluba government embarked again on ESAF programs. Reductions in administrative expenditure from 31 to 27% of GDP were envisaged, while the revenue was to be increased by 1% and private borrowing had to be constrained. This program explicitly recognised the social consequences. Accordingly, food subsidies and a rise in social spending had been included.

However, per capita GDP declined by 16% overall. Although wages did not decline further, household incomes decreased because of a reduction in jobs (approximately one fourth relative to the work force). Despite the increased government expenditures for social services, health and education provision declined further. Malnutrition spread, and mortality rates increased.

Additionally inflation (a main target of the IMF) increased considerably after the implementation of IMF measures. Capital convertibility, interest liberalisation and the extension of user fees for social services had an adverse impact. On top of it all, the country’s economy had to face sharp declines in copper prices (copper makes 97% of all export earnings) and had had to go through three devastating droughts.

c)      Zimbabwe[33]

When Zimbabwe recognised in the late 1980s that its industrial strategy had become unsustainable and products were simply not competitive on the world market, it regarded a policy change as unavoidable. Therefore, it applied for an IMF funded structural adjustment program to get help and advice in restructuring its economy. The first program started in 1990 with a SBA, and Zimbabwe still takes part in an adjustment program. Altogether, the program had two main parts that were highly interconnected: fiscal adjustment and economic liberalisation. The fiscal deficit was to be brought down to 5% of GDP, and taxation rates that were perceived to be dysfunctional high were to be decreased. Revenue would be protected by rising economic activity. Interest rates were to be completely deregulated. Public expenditure was to be driven back massively, what made cuts in social spending -though not mentioned explicitly- inevitable. Besides, labour markets were made flexible, the financial sector was deregulated and states owned enterprises and protectionist rules were dismantled. Of the two components, the second was implemented to an astonishing degree while the fiscal goals were missed.

Meanwhile the deficit increased to 12% of GDP causing high nominal and real interest rates, which in turn had a very negative impact on private investment. This fuelled the employment problem. Government expenditure did not decline but rose by 3% to 41% of GDP. Public consumption declined by 37%. Health and education service provision, which had been one of the main achievements of the Zimbabwean regime, declined substantially. Infant mortality rates rose significantly as well as maternal death rates. In education, however, it was more the decrease in the value of education (i.e. reductions in teacher’s education) than a reduction of the availability of services that accounted for the negative impact.

d)      Zaire/Congo

Zaire’s case is outstanding. Since its socio-economic affairs were completely subjected to the logic of power politics and economic exploitation. The loans to Sese Seko Mobutu, the personification of the Zairian state, during the Cold War were clearly nothing else than additional liquidity transfers by the US through the Fund to keep Mobutu in power. He strongly supported American interests in the region and provided a base for CIA actions.[34] Zaire first started structural adjustment in early 1976. Four other SAPs followed this first program until 1995. The policy conditions centred on differential taxation of different economic sectors and activities, reductions in state spending, the introduction of market pricing and trade liberalisation. The first as well as the second program collapsed because of Zaire’s inability to meet at least the minimum standards. In the mid 80s, reforms were finally implemented. Although growth was restored, per capita income fell and consumer prices and sovereign debt kept rising.[35]

Mobutu’s personal predatory empire fell in the First Congo War, which then soon led to the Second Congo war -sometimes referred to as the African World War- lasting until today. Therefore, it would be redundant to consider any present socio-economic realities in Zaire/Congo in the light of structural adjustment. To give an indication, according to the Sueddeutsche Zeitung 04.03.2001, one of the last producing companies in Congo -a textile firm in Kisangani- is near to breakdown because of the war. And fierce competition of Asian products that illegally reproduce textiles from Kisangani. Most Congolese live on subsistence and aid from international agencies. IMF conditionality in Zaire never had an impact on how the economy was structured.

IV. Criticisms of the IMF’s role contrasted with each countries internal situation

In general, critics claim that the SAPs not only fail to achieve growth, higher rates of foreign investment and better living standards in the respective countries, but even worsen the situation. Thus, income disparities widen, malnutrition rises, mortality rates as well as sovereign and national debt increases and per capita incomes decline. The removal of import barriers hurts the fragile national industries, and export promotion increases the dependency of the developing countries on primary commodities.[36] Additionally, it is claimed that the IMF exercises great power over ESAF countries, as they are all heavily indebted at Western banks and states, as well as at the IMF. Some even argued (Harrod, 1992) that the IMF became the debt collector for the industrialised countries. It is sometimes referred to as the “International Ministry of Finance” (at least for Africa) and criticised as a “proconsular force” (Sachs, 1998).[37] Another point quite often made, is that the Fund applies an economic orthodoxy in its dealings with developing countries -generalising their problems without paying attention to their special circumstances- that are underpinned by theoretical assumptions (comparative advantage theory, perfect competition assumptions) that do not exist in reality and are therefore bound to fail.[38]

However, it is crucial to broaden the scope of one’s analysis taking more factors into account than just the IMF. Therefore, the assessment of the Fund’s programs in SSA will be evaluated against the domestic situation in the four countries serving as case studies. As already suggested in the beginning, it might be comfortable to blame mainly the Fund, but in order to understand SSA’s ongoing misery, especially of the ordinary people, more factors need to be identified.

a)      Uganda[39]

Despite the above shown overall success of Uganda under SAP since the Museveni government came to power, strong criticisms remain. Privatisation is said to have predominantly benefited the government and business elite instead of the people. Neither efficiency nor employment have increased, and workers rights are still not respected. In fact, employment has shrunk.[40] Respectively, work in the informal sector has expanded, while high-level jobs are given to foreigners[41]. Another concern is raised regarding constrained public expenditure. Civil servants, in the absence of living wages, the freezing of their salaries and job insecurity are prone to lax work ethics and corruption. Most spend more time on a second job than on public service provision. Public services are additionally eroded by budget ceilings. Especially the health sector is said to be unavailable for the poor. In both social sectors -education and health- corruption is said to be high. Budget resources do not reach schools and medical centres, while the payments of people never find their way back to the government agencies. Nevertheless the NGO “50Years” reports that enrolment jumped back to 90% due to the elimination of school fees most recently.[42]

Lastly, it is argued that liberalisation procedures regarding trade and finance[43] have increased farmers’ vulnerability to exploitation by middlemen (e.g. transporteurs). Competition has been reduced by the displacement of small-scale traders, and inappropriate and false advice of how to use chemicals led to disastrous crop outcomes for farmers. Besides, farmers have been sold bad seeds. Additionally, agriculture and rural investment still bear high taxes, because of high transport costs; and the increase in volume of coffee exports rests on a reduction of smuggling and not on an increase of the production.

In general, critics agree very much with the objectives and programs of the IMF and acknowledge the success. But they are deeply concerned about the micro-level impacts. According to them, poverty is deepening and social indicators point at a worse performance than in most of SSA.

However, looking more deeply at Uganda, which is considered to be the star-performer of all countries undertaking adjustment, the impact of the domestic configuration of political forces, natural disasters and surrounding conflicts on the outcome of structural adjustment will crystallise.

That these profound changes in Uganda did come with Museveni is not surprising looking at the dictatorships of Obote and Amin. To even consider successful structural adjustment under their rule is out of question. But when Museveni came to power, things changed a lot. First of all, he brought relative peace to the country by a general amnesty for all the warring parties creating a base for an economic start apart from sheer subsistence farming.[44] Although reluctant in the beginning he soon negotiated a program with the Fund. And, in contrast to all other examples presented here, he stuck to the implementation of the program. What he achieved at least is macro-economic stability. But still the progress for the majority of the population is lacking.

In Uganda’s case one reason might be that money is spend on other things than the well being of the people. A considerable amount of the state budget had been used to pay own troops and material needed to fight in the Congo War as well as to support the associated rebel group of Jean-Pierre Bemba. However, one has to keep in mind that Uganda also profits from the war in Congo. Since its involvement in the Congolese war, Uganda’s gold production and exports rose considerably. Unfortunately, it is impossible to make a reliable assessment of costs and profits as data are hardly available.

Another factor is personal enrichment and spending on status symbols. Museveni recently wanted to purchase a luxury Gulfstream aeroplane that would have cost $40m amounting to approximately 20% of the defence budget. The only thing the IMF could do was to delay the approval of the debt relief program until the costs were offset by cuts elsewhere. Unfortunately, the IMF is not in the position to just forbid such purchases, but can only insist that a balanced budget has to be realised.[45] Where exactly cuts for the balancing are made lies in the decision of the government, as the IMF has to pay due respect to sovereignty[46].

The claim that corporate interests and the government are the major beneficiaries of SA can also not be solemnly attributed to IMF politics. It is again not the IMF that should be blamed but the elite in the country. It is first of all their task to stop patronage, corruption and exploitation of the poor by middlemen. But as the situation in Uganda suggests, this is not happening. It seems that the Museveni regime does not stop the patronage practices prevailing for a long time in Uganda.[47] This poses a threat to further economic successes in Uganda, as ongoing resource allocations by the elite would disrupt the recovery of the economy.[48] It seems that Uganda, in the absence of major natural catastrophes, could very well manage to achieve a better standard of living for all, if the elite would work for the country and not for its own advantage.

b)      Zambia

In the Zambian case it was explicitly criticised that the implementation of the IMF’s program was oriented under false presumptions. The high inflation, creating a credit crunch during the ESAF programs, had been avoidable from the side of the Fund. Furthermore, the severe reduction of government expenditures was far ahead of program plans contributing to the shortage of service provisions. Additionally, the two most important commodity sectors, copper and agriculture, which would have needed early policy attention were disregarded. Besides, user fees for social services were expanded at a time when especially the rural households were facing a deep liquidity problem. This severed the impact for the population dramatically, while the introduction of a cash budget contributed heavily to a parallel decline in the supply of medical material.[49] “50 Years Is Enough” quotes a study that reports how a 14-year-old suffering from acute malaria was turned away from the hospital because his parents could not afford the registration fees. Two hours later the boy was returned, dead.[50] Apart from these major requirements for economic growth and development, the building of infrastructure was completely overlooked. Zambia’s adjustment experience differs from Uganda, as the IMF hardly applied wrong programs in the latter, but the criticism very much remain the same. Neither growth nor higher living standards nor any improvement of the conditions was achieved. On the contrary the situation worsened under structural adjustment resulting in enlarged and deepened poverty.

Despite the obvious mistakes made by the Fund, there is more to the story of Zambia’s downturn. In the 80s the Lusaka government headed by President Kaunda never lived up to its promise to implement the advocated and agreed policies. Accordingly, one can hardly attribute economic downturn to IMF policies as they were never implemented. Zambia simply did pretend to implement everything that was asked in return for the loans, but this did happen only on paper, restoring the old system informally without any changes.[51] This did delay the obviously needed change of the economy, whereby the resources from the Fund were used for anything but restructuring the economy in one way or another. Consequently, the record of the Kaunda government was a huge public deficit and non-reformed statist economy[52] with the state as major actor.

The following government of President Chiluba -who was elected in multiparty elections and is governing until now- failed again to achieve sustainable economic progress and deliberately delayed the privatisation of state owned enterprises as ZCCM resulting in continued mismanagement and misuse of profits and state subsidies.

Natural catastrophes have again to be included in explanations why living standards fell drastically and malnutrition spread. For instance, the country was hit by three droughts in 1996, a situation that is hard to incorporate in planning. Furthermore, the political situation is characterised by a constant struggle for power. Violent internal fights for power, along with repression and human right abuses, as well as attacks from external forces as UNITA are daily features.[53]

In addition, one has to note the well-known imprudent and corrupt attitude of the political and economic elite. For instance, President Chiluba, once a promoter and defender of a multiparty state now tries to change the system back to a one-party state, in order to keep himself in power securing access to privileges, wealth and power.

A major critic in all cases was the deterioration of social services. In Zambia, the members of parliament are regularly flown to South Africa for AIDS treatment, as the Economist found. And if ministers retire (willingly or unwillingly) the reasons are tax evasion and corruption. Members of the government also have access to soft-loans.[54] This evidently raises two question: whether or not a more equal distribution of resources might not be one of the crucial variables to improve the overall situation; and to what extent the IMF can be blamed for a deterioration of the socio-economic situation. “Corruption seems to mar everything Chiluba’s government does, from piping oil to buying maize to avert famine”.[55] “It has been estimated that if all of the aid that flowed into Zambia between 1961 and 1993 had been invested at a normal rate of return, Zambia’s GDP would have been at least thirty times what it is today”.[56]

Finally, Zambia is facing another major problem, the wars surrounding it. The Angolan and Congolese wars caused an inflow of huge numbers of refugees that Zambia is unable to care for. However, even more crucial is that Zambia is a landlocked country. Following, the closure of trading ways through these countries means worsening conditions for the Zambian industry. Thus, transportation costs for im- and exports increased as did price levels in general.[57]

c)      Zimbabwe

Generally it is criticised that the program failed to meet any of the set targets. Again, the phase of adjustment coincided with falling living standards while not even achieving macro-economic stability. Apart from the usual claims that under SAP distribution disparities had worsened -enriching the wealthy (top fifth of income groups) while making the poor poorer - there is an outcry regarding labour market flexibility[58], which is said to be of major benefit to employers. However, the domestic entrepreneurs were too severely hit themselves by the adjustment process. The opening of the markets and the removal of subsidies let to a breakdown of many firms (especially in the textiles industry) or let them to suffer enormous losses (electronics) as they were not prepared for international competition. There was also a negative impact on the domestic food sector resulting in shortages when production quotas were removed. Alongside, the high interest rates for domestic credit prevented the industry from investing in equipment and technology to increase productivity and output.[59] Health and education access were limited drastically in contrast to the time before adjustment. The reported quality of medical treatment (availability of medicaments, trained doctors etc.) fell drastically from 1990-93. Women mortality after childbirth doubled and hospital attendance declined sharply. In order to pay the increased school fees, girls had to sell their bodies; accordingly prostitution increased.[60]

Zimbabwe, indeed, is the showcase of the IMF’s opponents. However, while it is widely claimed that Zimbabwe only approached the Fund to jump-start growth, this is not right. Despite the fact that the Fund’s policies were far removed from economic realities, and missed to take into account that droughts happen frequently in Zimbabwe -although this one was the worst in living memory[61]- it must not be denied that Zimbabwe, when it approached the Fund in 1990, was facing severe problems in its industrial sector and macro-economic situation.[62]. Clearly, not all of the Zimbabwean problems did derive from false Fund policies. SAPs are “joint-ventures” between a government and the Fund and require mutual co-operation and willingness to adjust. In Zimbabwe, this was clearly not the case. The majority of the government, including Mugabe, was highly suspicious and never supported the conditions negotiated for the loan. This underlying reluctance to adjust and the fact that there was only one man in charge -the minister of finance- who had an overview about the structural problems and actions to be taken, made it extremely difficult to implement the right measures.[63] Additionally, exactly the minister of finance is reported to have been in a precarious state of health, which was reinforced by his age. The claims that the IMF was responsible for decreasing health services[64] is dismissed by the circumstance that this is due to the immense rise in HIV infected persons and large population growth.[65] Furthermore, the aggressive land distribution policy[66] of Mugabe and the dismissal of the constitutional court is certainly a major factor why nobody wants to invest in Zimbabwe. Foreign investors for productive long-term capital are seeking the rule of law, security and stable political conditions, especially with regard to ownership rights. “The Robert Mugabe government unleashes habitual terror on dissenting political opponents…thereby ruining the economy”.[67] Despite the obvious failures of the IMF in the beginning, the government did and does not do much to restore a good business climate. Further falls of the GDP are expected while inflation keeps rising due to a 55% overvalued “Zim-dollar”.

Another point is that instead of reducing the military budget and enlarging the liquidity provision for social services, Zimbabwe heavily engaged in the Congo War. An often-made claim that the IMF is constraining a nation’s sovereignty cannot be seen here, as excessive military adventures are not one of its adjustment proposals. The Congo “adventure” increased the reported defence budget from 4.7% to 5%. This means expenditure of $1.2m daily that were partly taken from Fund loans, which should have been used to restructure the economy. Another problematic point for the Fund is that it is often very difficult to get a comprehensive view of the data of a country as governments, as Mugabe’s, often simply lie in order to have access to IMF funds.[68] Finally, one has to think of corruption. Resources for the poor are going into the pockets of bureaucrats, and non-existent fees are charged. In Zimbabwe several ministers had to resign because of such issues.[69] Clearly, economic recovery and adjustment can only work when the even more scarce resources are used for the envisaged purposes and not to enrich the ruling elite. The same is valid for market competition. Mugabe twice overthrew the decision of the Tender Board[70] and gave contracts to build the new Harare airport to a firm that was supported by his nephew, while in the case of the Hwange Power Station an inexperienced Malaysian company was awarded instead of a large MNC.[71]

d)      Zaire

In this case the failure to achieve a healthy condition for the economy resulting in better living standards, high numbers of employment and a balanced state budget is again pointed out.

Zaire is probably the strongest and most obvious case. The government only approached the Fund, as all countries, because it saw itself unable to serve the debt accumulated in the oil crisis out of the official budget. As the IMF programs threatened to destroy the Zairian clientelism, the government failed to implement any of the agreed policies.[72] Although on paper, program implementation appeared successful since the early 80s it is doubtful that (except exchange and interest rate liberalisation) anything changed in Zaire to promote growth, employment and the well being of the people.[73] The Zairian elite -regardless if a market oriented or a statist model would have been promoted- was never interested in improving the situation of its people by changing the status quo of the vampire state.[74] Under Mobutu, an informal, patriarchal economy had been build up that worked only for the fortune of Mobutu and his associates. He literally plundered the country, using state owned enterprises relying on the military to secure his activities and rule. His personal fortune, deposited partly in Switzerland, accounted for roughly the same as Zaire’s sovereign debt.[75] This flow of money very much showed the ineffectiveness of any aid and conditionality in Africa.[76] IMF policy implementation to privatise state owned corporations and a market based economy reducing state involvement and aiming at removing the predatory system could well have meant access to Zaire’s wealth for its people, which was not what the elite wanted.

Since the overthrow of Mobutu by Kabila, and Kabila’s death things by no means got better. The recent killing of four UN trainees (May 2002) shows how difficult it is for international staff to work in this country. Zaire or Congo is now a war torn country where a huge number of parties extract its wealth, while nothing is preferred to the Congolese. These people certainly would prefer a neo-liberal rule exercised by the IMF, but unfortunately this is not possible, as the IMF does not have the power to interfere with sovereign rights.

V. Assessment and External Factors

The analysis carried through so far suggests at least two things. One is that despite the obvious neo-liberal agenda of IMF programs, there has not at all been the same blueprint for different countries. However, it is right that the Fund’s conditions all focused on a reduction of state involvement in the economy, an opening of economic and financial markets and a deregulation of protection measures for workers and for the industry.

The second point is that the economies did not take off but were and still are facing great difficulties. For instance, poverty increased in all case studies, especially in the rural areas.

The Fund highly contributed by false or too harsh and fast policies in cases such as Zimbabwe and Zambia is certainly true and can not be negated. However, the analysis of the internal factors demonstrated that the argumentation that SAPs are the main causes for Africa’s ongoing failure to catch up with the Rest of the World (ROW) is not sustainable. Partly, this has to be attributed to the fact that an evaluation or even estimation of the real impact of structural adjustment (SA) is impossible. Furthermore, it can neither be compared to what would have happened without SA nor is it possible to single out the consequences of other factors during the adjustment periods.[77]

To sum up, political instability and mismanagement are crucial variables to explain the economic regress in the majority of these countries and the deepening poverty.[78] The IMF co-ordinator for Southern Africa recently remarked that, “…ESAF…had flaws that allowed funds to be diverted -usually into pockets of politicians-“ and that,”…to resolve income distribution is the responsibility of every country itself”.[79] As Pauly notes, “The Fund could encourage economic liberalisation, but even when its financial resources were in play, it could not force unwanted policy changes. It could, however, play the role of a scapegoat for policy changes desired by leaders but resisted by their constituents.”[80] The driving force behind African governments is most often rent-seeking activity. The domestic economy is therefore not much more than a spoils system benefiting those who control the institutional levers.[81] In order to initiate change, African countries have to lay the institutions of limited and accountable governments.[82] This is something the IMF tries to achieve with its focus on private market power in the economy and on reliable legal frameworks, but failed to achieve because of the hostility of the dominant African state form towards all sustainable accumulation inside rules and institutions that underpin the market.[83] This is certainly the reason why there has been less active implementation of true privatisation, as well as civil service reform. Most of the time, companies remain under state or quasi-state ownership and civil service patterns remain largely unchanged.[84] These stop and go policies the efficacy and positive effects adjustment programs may have undermine to a considerable extend.[85] Furthermore, it shows that IMF leverage over policy implementation is limited and can only be applied to a specific set of policies[86]. Broadly, a full program implementation could promote GDP and export growth, but only if the policies are strictly implemented.[87] Nevertheless, it still is doubtful whether GDP and export growth are sufficient achievements to eradicate poverty on a sustainable basis.

A factor, that up to now has not been explicitly mentioned is debt. Debt servicing to foreign lenders often prevents that successes of SA –i.e. higher state revenues- can be used to improve the situation of the poor or to finance desperately needed infrastructure projects. But it does not lie within the range of the IMF’s power to cancel this debt; here the industrialised nations have to act by cancelling for instance most of the debt. This now directly leads us to a brief discussion of the external factors involved in SSA.

Complementary, to the internal obstacles to restructure the respective economies according to the adjustment program, one has to consider external factors (constraints), which mainly derive from the industrial countries and the structure of world politics. As we have seen so far there were two components hindering development in SSA. As mentioned above, the IMF is a multilateral institution where the members decide about the nature of its policies. As the voting power is distributed in principle according to economic weight in the world economy, the developed countries decide about the actions and conditionality of SAPs. What the IMF does or does not, depends on the will of the industrialised states. The neo-liberal/-classical approach of open markets, free capital flows and liberalised exchange and interest rates is the dominant ideology how economies should be structured at present.[88] Clearly, this approach is much less favourable for developing countries than was the Bretton Woods system of fixed exchange rates. Fluctuating interest and exchange rates in the industrialised countries contribute to fluctuating debt ratios of debtors. The elimination of concerted capital controls makes the situation further volatile. SSA countries, in urgent need for capital and investment, can either opt for controls to prevent speculative in and outflows -what makes them less attractive to invest- or for complete liberalisation what enhances the volatility of the balance of payments[89].The IMF has no power over these decisions but simply has to accept and adapt to them.

Then there are two other major shortfalls for the African economies. The first shortcoming is the general deterioration in terms of trade and world commodity prices. With the exception of oil and diamonds commodity prices are constantly falling, especially in absolute terms. For SSA and in particular for the case studies this meant a severe loss of foreign currency as copper and coffee did make less and less profit. Additionally, the home production of goods is often undermined by the dumping of subsidised products from the US and Europe.[90]

The second deficiency is the shift of the production circle from industrial manufacturing to the information economy. Hence, SSA’s -apart from South Africa- desperately try to achieve late industrialisation in a time where services and knowledge become of primary importance. This means a further weakening of its position in the global political economy. Clearly, this trend is worrisome and there should be a concept to help the people in SSA. However, this is not anything the IMF could do.

Bilateral aid is a further variable that is essential for SSA development. Here, it is important to note that there are fundamental differences between the countries. Donor selectivity and the reduction of aid flows after the end of the Cold War is a major factor for African development[91], but not one the IMF decides about. The same can be said with regard to dictatorships favoured and supported by the US or France for instance.

VI. Conclusion

That the problems of the discussed examples, including Zimbabwe, did not have their origin in structural adjustment is evident. Accordingly, the performance during structural adjustment can also not be attributed to the IMF solemnly. Although the Fund has obviously made severe mistakes in the implementation of macro-economic policies, as we saw in the discussion of Zambia and Zimbabwe, where the implementation was too rush and harsh, the severe worsening of the socio-economic realities in SSA has deeper origins. One is the external environment that can be described as hostile to economic progress in Africa despite massive aid inflows to SSA over time. However, the major obstacle identified in this paper is the socio-economic structure of African states. After all, Africans can only help themselves, as it is unlikely that the global political and economic structure will change in their favour. To achieve an improvement all layers of the society have to work together sacrificing their self-interests to the well-being of their country.

The IMF evidently is in a difficult situation in SSA. On the one hand, it is bound to the neo-liberal policies advocated by its major shareholders and therefore has to pursue adjustment programs that confine to these. Besides, it is often used by the dominant economic powers to exercise their foreign policy interests.[92] On the other hand, the African governments themselves use it. The Fund, the weakest player in the game, has to act as the scapegoat for corruption, fraud and ongoing prebendalism (or even predatory rule)[93] in these countries. Its policies are rarely fully implemented and objections to them exist from the beginning on. Although the Fund makes serious mistakes that result in adverse impacts than intially intended, the main responsibility for the miserable situation of Africa’s people can not be blamed on it. Furthermore, suggestions that the Fund supports dictators is not true. If it would cancel loans to African states that do not pursue strategies that are good for their economies and people, these countries would probably be in a worse condition than before. This is known as the Samaritan dilemma.

Despite the obstacles, which the dominant global economic ideology, characterised by free capital flows and liberalised trade is posing, Africa, first of all, has to change itself. Without reliable governments and functioning institutions change, is unlikely to come. Considering the capital scarcity that signifies a least or less developed country, the IMF and its resources are crucial to get Africa back on track again.

Here, one has to note that African leaders have embarked on a joint African partnership, the New Partnership for Africa’s Development (NEPAD) in 2001, in order to promote Africa’s economic and social revival. This initiative seeks to combine the strength of 15 African countries and of the developed world to achieve sustainable development. Although it is too early for an assessment of the successes and shortcomings of the initiative, the author doubts that it will amount to more than a “paper tiger”, as the initiative serves as a roof for and successor of three former action plans that largely failed to achieve their goal to increase economic and political stability.[94]

However, if African governments and the IMF work in accordance with each other, a positive outcome –as i.e. Uganda- might not be too far away. But blaming solemnly the IMF will not help at all. Constructive inputs regarding macro-economic policy adjustments might be more of a success. Perhaps, Mozambique’s current success in post-conflict development could serve as an example for the rest of the region.[95]

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