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IMF & Its Destruction of African Economies

March 11, 1998

David Crane got it right in is essay, IMF’s Intrusive Policy Raises Criticism, Business Commentary in the Toronto Star of March, 10 1998. The IMF’s basic mission, I believe, is underscored by comments made by the US Deputy Secretary of Trade, Lawrence Summers, when he says that it is to increase US exports. Many, especially in the developing world, see this body, along with the World Bank, as promoting a Western (nay!) American agenda.

For a long time now the IMF policies and intentions have been under attack, especially in African since the mid-1980s. That prominent scholars such as question the viability of its policies, is a vindication for many skeptics in the developing world. As such it comes as no surprise. The fundamental error is the body’s “one-jacket-fit-all” approach that leaves no sacred cows be they domestic policies or otherwise.

Tales from the African continent, where the organization has been most active, bear witness to its failed policies. Wherever the IMF has gone, it has left behind devastation and reversal of hard-earned economic gains made over a long time. Former Tanzanian president, Mwalimu Julius Nyerere, put it graphically with an illustration of the impact wrought on Tanzanian education and health sectors.

Under Nyerere’s presidency of close to 25 years, Tanzania had made substantial advances in education and health. The policy of universal access to primary school had resulted in primary school enrolment rates of up to 98% for school age children. With over 68% literacy, the country had become one of the most literate societies in the developing world. Similar gains could be seen in the health care sector; life expectancy was up and infant mortality rates substantially low. Tanzania was developing fast! Yes, until the IMF came in.

Nyerere’s successor, Hassan Mwinyi, embraced the organization in toto, swallowed its bitter pill and hoped for economic growth jump start. As an obedient “patient”, the Tanzanian government cut government spending across the board, including education and health care. The economy was liberalized and imported goods came flowing in. Despite all this, expected positive results have yet to show up.

Instead, as Nyerere pointed out in an interview a year ago, school enrolment rates have dropped significantly. Primary school enrolment is now at record low 66% participation rate, down from 98%. Current pointers to literacy rates, infant mortality and life expectancy suggest a near-universal decline, courtesy of IMF medicine. Literacy rates are falling; infant mortality rates are up while life expectancy has declined. No doubt this is a reversal of gains made by that country since independence. Nyerere, one of the most respected statesmen, must be a sad man to see all that he worked so hard for reversed in such a short time.

With mandatory cost-sharing aimed at reducing government spending, IMF policies have reduced access to education and health care. These very essential services once fully subsidized by the government are no longer affordable to many. Partly culpable is the speed with which they were withdrawn. Rather than gradually implementing cost-cutting and ushering in cost-sharing, many of these policies were put in place overnight with neither warning nor preparation.0

The Tanzanian story can be retold over and over again throughout Africa, be it in Kenya, Zimbabwe or Ivory Coast. In 1995 New African, a European-based monthly, ran a story about the effects of the IMF’s Structural Adjustment Programmes (SAPs) in (especially rural) Zimbabwe. Unable to raise even basic consultation fees, many peasants choose to stay home hoping sicknesses will go away. Later, these would show up either as chronic cases that needed hospitalization or actual demise. The SAPs have indirectly imposed unduly high costs on the health care sector; diseases that could be cured at early stages are now killing people or costing too much to cure. Indications are that Zimbabwe will continue recording a decline in life expectancy.

In Kenya, aside from the health sector, the greatest impact has been felt in the education. The Kenyan government, on the advice of the IMF, withdrew much of its funding for this sector. The results have been disastrous. As in Tanzania, school participation continues to decline and more often than not, the school-age children find themselves in the street. Kenyan towns have time bomb waiting to explode from the ever worsening street kid menace. And there is more!

Higher education has also had its share. No longer can universities afford to meet their budgetary needs, especially salaries for academic staff. As a result members of academic staff continue to leave for “greener pastures”, especially to North America and Europe. More and more, such scholars, on either research exchanges or higher studies, choose to remain in the “developed” world. The full impact will be felt a number of years down the road as the brain-drain persists.

Meanwhile, university students face the financial crunch with cataclysmic results. In an effort to meet their share of the cost of ever-increasing expenses, a number have turned to even illegal activities to raise/earn money; young university women, especially, have become prey to the moneyed class. Anecdotal evidence suggests increased prostitution on university campuses. Meanwhile, some reports suggest that once secure campuses are becoming drug trafficking centres.

Yet, this is only a glimpse of the impact of IMF policies. In the industrial sector, the effects have been just as bad. With liberalization there has been a flood of imports. Be it in Harare, Nairobi or Dar es Salaam, one can get the same good available in London, Paris and New York. The bad news is that not many can afford these due to high unemployment rates. With liberalization came factory closures as formerly protected industries became exposed external competition. In Kenya, a once vibrant textile industry lies in ruins with no respite in sight. Subsequently there have been job losses with catastrophic results: crime is up and continues to rise. Meanwhile, any small differences between government and IMF negotiators jolt the local currency at will, causing ever-increasing prices of goods. On the other hand, expected infusion of foreign capital falls short of projections.

Clearly, the IMF has done little good in countries where it has intervened. The only beneficiaries from its policies have been the investors whose money the IMF has guaranteed. On the other hand, it has generated greater dependency as it has driven these countries to more and more debt.

Matunda Nyanchama

Copyright © 1998 Matunda Nyanchama. All rights reserved.

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