/ 11 March 2009

IMF faces trust problem in Africa

As the International Monetary Fund (IMF) seeks ways to help Africa through the global economic crisis it faces deep-rooted mistrust stemming from past mistakes.

Two decades of so-called ”structural adjustment” policies have tainted the world financial institution’s standing, experts say.

IMF boss Dominique Strauss-Kahn acknowledged the problem at a two-day conference in the Tanzanian capital on the impact of the crisis on Africa.

”There is an image problem, it’s one of the goals of this meeting,” he told reporters at the conference, attended by 300 finance ministers, central bank governors, economists and other players.

”It’s not just that we prefer being loved than hated … It’s reached a point where we are hindered in our work,” he said.

Africa’s recent gains have been undermined by a food and fuel crisis which has been compounded by the global financial crisis.

The continent’s growth forecast for 2009 has been halved since last year to around three percent. Considering the steady population increase, that translates into a growth output per person close to zero.

There is no question Africa needs help but governments are nervous at the idea of asking the IMF.

”For political reasons, it has become impossible for some governments to tell their public opinions that they will seek help from the IMF,” Strauss-Kahn said.

In the 1980s and 1990s, the IMF and World Bank conditioned loans on ”structural adjustments”.

Critics say the privatisation harmed basic welfare, the agricultural policies led to soaring poverty in growing cities and drastic budget requirements that often affected social spending.

The policies were widely seen only benefiting the lending rich countries and as infringing on the sovereignty of borrowing nations.

Speaking at the conference, Tanzania’s President Jakaya Kikwete reminded the IMF of its legacy and described its relations with Africa as ”bitter-sweet”.

”I remember huge anti-IMF demonstrations in the early 1980s,” Kikwete said, adding that many considered that ”accepting dictates from the IMF” was like reneging on the achievements of decolonisation.

”In the end, with the support of the IMF, notable success were made,” he nevertheless added.

Strauss-Kahn argued that resentment of the IMF was unfair, that the institution has changed and that Africa would be even worse off without IMF policies.

”The IMF is still regularly accused of brutally imposing its policies … while in most African countries growth rates have been good, notably because these policies have been implemented,” he said.

Sounder monetary policies have kept inflation at single-digit levels and fiscal deficits low in half of African countries.

Jeffrey Sachs, a leading economist and director of the Earth Institute at Columbia University, argued Africans had a right to be suspicious.

”Without question, the historical record of the IMF in Africa is dismal, especially during the structural adjustments … driven largely by the United States,” he told AFP.

Sachs said the IMF had improved in recent years, but he added it was still far from giving Africa the attention it deserves.

”The IMF has changed its modus operandi, it’s definitely more sensitive to social and development issues, yet it does not have a track record of success, of really spurring development or of speaking out on behalf of the poor countries adequately,” he said.

Addressing participants, Strauss-Kahn vowed that the era of heavy-handed IMF management was over and vowed more flexible policies tailored to countries’ specific needs.

”What I like to improve is the relationship we all have together … I want you to consider the fund as a partner,” he said. — Sapa-AFP