The IMF and the World Bank Conditionality for Developing Nations: Historical Review for future engagement with Africa – Series 2.

By. Dr. Francis Chisembe Chishala.

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Africa trajectory to macroeconomic development has always be carried out through interdependency on international institutions like the World Bank and the International Monetary Fund.? There has been a history in Africa developmental journey especially coating years like the 1980s and the 1990s.? It is alluded that:

It has been argued that the IMF and World Bank have not been protagonist in Africa’s macroeconomic history.? For instance, during the 1980s and 1990s, IMF and World Bank constrained many African countries with conditionality that played a role in economic stagnation during those years, with dire social implications. This conditionality was almost exclusively geared around neoliberal theories and relied heavily on privatizing state-owned enterprises and reducing wages and pensions in the civil service.

This essay will discuss the above statement and propose what could be the new conditionality that IMF and World Bank should now use in order to help Africa develop its macroeconomic agenda now that IMF and World Bank have come back again to assist Africa.? To do so the essay will begin by defining terms like ‘conditionality’, ‘macro-economics,’ and ‘neo-liberalism.’? ‘Conditionality’ is a term used by lending institutions to describe modalities prescribed by these institutions to developing nations that if followed and abided too, then the receipt would access the support required.? ‘Macroeconomics’ encompasses a branch of economics that studies how the markets, business, consumers, and governments behave.? It examines wider spectrum of the economy including inflation price, levels, rate of economic growth, national income, Gross Domestic Product (GDP), and changes in unemployment (www.investopedia). Neo-liberalism theories postulate a free market economy that promotes liberalization and privatization akin to capitalism and democratization.? This concept emphasizes free trade or free market economy, globalization, and deregulation (www.investopedia).?

Many scholars (Dambisa Moyo; 2009, Giles Bolton; 2007, and Jeffrey Sachs; 2015) have written about aid, poverty and development focusing on developing nations.? They have traced the trajectory of aid from the 1980s and 1990s and the subsequent future indicating how this has had a drastic replication on the receipts.? History has indicated that international lending institutions like the IMF and the World Bank have not paid allegiance to their primary reason d’etre but have somehow digressed and benefited the Western world or the developed nations.

For instance, Dambisa Moyo talking about the IMF and the World Bank echoes that:

At the time of their inception, the exact responsibilities of the World Bank and the IMF were clearly delineated.? In very broad terms, the World Bank was designed to facilitate capital investment for reconstruction, and in the aftermath of the war the IMF was to manage the global financial system.? In later years, both institutions would come to occupy centre-stage in the development discourse, but the original mandate targeted reconstruction, rather than development per se (2009:11).

In the 1980s and 1990s Africa witness the growth of democracy that brought with it a free market economy of privatization and liberalization.? This meant that many countries embarking on this historical voyage had to embrace the conditionality framework imposed by big lending institutions like the IMF and the World Bank.? Many developing nations in Africa despite being endowed with natural resources, they lacked financial muscle to convert these into finished goods for export and for the local market.? African countries could not compete with the developed world. Like some authors (Kjell Havnevik, Just Faaland, and Tony Killick; 2018) in their article The IMF and the World Bank in Africa – conditionalities and their impacts, argue, that the conditionalities perpetuated poverty and dependency instead of reducing poverty.? ?Moyo argues that the IMF introduced the Structural Adjustment Program (SAP) which in reality made developing nations pay back their debts hence benefiting the lending nations and institutions leaving developing nations poorer than before.

Jeffrey Sachs (2017) in his book; The End of Poverty: How we can make it happen in our lifetime, highlight the issues of the debt consolation campaign that help developing nation to be on track again.? For instance

The IMF and World Bank launched and deepened the debt relief program known as HIPC (Highly indebted poor countries) around the time of the MDGs.? This program offered roughly fifty very poor countries the chance for a financial fresh start by removing substantial external debt from the books.? As a result, African countries in particular entered the 2000s with macroeconomic stability and fiscal space to invest in economic growth (xxiv)

Privatization and liberalization made nations’ government forfeits their control of parastatals hence reducing their per capital income.? Local investment was close to Zero as many Africans could not manage to compete with huge conglomerated who got companies at giveaway.? The African governments’ loss of control of the means of economic power resulted in a massive lay off of the labour force.? The was an increase in an employment. For instance, in Zambia the government privatised the miners and many miners lost their jobs.? This lack of government controlling the economy had drastic effect in the government provision of social amenities such as free education, quality health services and many such benefits.? We had seen the influx of big international group of companies like the Agro American taking over mines in the Democratic Republic of Congo, in the Rwanda, Angola and Zimbabwe.?

Like Dambisa Moyo had noted earlier that it’s the developed world that benefited from this relationship of financial aid by the IMF and the World Bank.? Moyo proposes good governance, ethical practice in business and remittances.? She argues that aid can keep coming but if Africans lack the political will through mismanagement and corruption then the future would always remain bleak.? The idea is that instead of depending of IMF and the World Bank, developing nations should engage other partners like China, Russia, India, Brazil and South Africa by joining other regional institutions such as BRICKS.? But also Africans can work together and consolidate the African Union mechanize and erase borders, having common currency.?

We might think coating IMF and the World Bank, but aid and financial assistance do not come for free.? Africa and developing countries have to look into themselves.? The have to find their own solutions rather than embracing conditionality from the lending institutions.? Giles Bolton argues that:

If Africa’s continuing poverty had nothing to do with decisions we in the West have made, there might still be an argument that we should do more for Africa for moral reasons.? But it would be a weaker argument.? Since Africa’s poverty is, however, directly influenced by decisions we are making on global trade every day, and since many of those decisions are titled unfairly against Africa, we have nothing less than a duty to do something about it (231).

Dambisa Moyo notes that:

The IMF has stated that developing countries that rely on foreign capital are more prone to their currencies strengthening. Accordingly, aid inflows would strengthen the local currency and hurt manufacturing exports, which in turn reduces long-run growth.? IMF economists have argued that the contribution of aid flows to a country’s rising exchange rate was one reason why aid has failed to improve growth, and that aid may very well have contributed to poor productivity in poor economies by depressing exports (2009: 63).

Dambisa highlights that even IMF themselves they know that foreign capital does not solve issues.? Therefore, developing countries, especially those in Africa should look somewhere else or within themselves to map a new trajectory towards sustainable development.? Of course the IMF and the World Bank might want to appear again with other conditionalities to help Africa.? It is impossible to think of conditionalities that would be of benefit to Africa.? The IMF and the World Bank, as studies have shown would always promote the interest of their countries in the West.? It is being noted by Dambisa that they had side track from their earlier focus for recovery and reduction of poverty.? In as much as the global south are not allowed to be on the coalition group for decision making and management of developmental agenda, the global north will continue to exploit the global south.? The IMF and the World Bank have always prescribed remedies and conditionalities for aid.? The developing nations are never allowed to be part of that decision making process.? The world has changed and the global south, through the USA and UK promote human rights and its freedoms but yet the champion hegemonic interests.? Neo-liberal theories still guide the dependency interaction of the developing nations with these western financial lending institutions.

Instead of proposing new conditionalities, it is high time Africa shaped its own destiny and perhaps do business with China and other regional institutions like BRICS and AU.? The crop of new African leaders is vocal in challenging even the United Nation’s composition of the security council.? African leaders are taking the root of Pan –Africanists like Nkwame Nkruma, Gadaffi, Magufuli and others.? The macroeconomic and development agenda for Africa lies in Africans taking charge of their future as they manage the present.

IMF and the World Bank have failed Africa and just like the IMF echoed as cited by Dambisa, they have no reason to start thinking for Africa.? It is high time African leaders owned up and started acting ethically by curbing corruption and misappropriation of resources.? A political will, accountability and responsive leadership is what Africa and other developing nations need to survive and sustain their macroeconomic as they change the shape of development.

Globalization as well as modernization have proved that these concepts do not place all countries at the same equal playing field.? Many countries in the global south have lagged behind in terms of development.?? The IMF and the World Bank have given conditionalities and have also anchored these with the quest to respond to the Millennium Goals as well as to the Sustainable Development Goals promulgated by the United Nations on the global level.? But even at this level of international coalition the global south has little or no voice at all.? Instead of the IMF and the World Bank target their aid to Africa’s holistic development that does not have as criteria for assessment the GDP negating the Human Development Index that is more realistic and progressive especially for Africa and the global south.

For instance, the issue of the IMF introducing the SAP (Structural Adjustment Program) and also the debt cancellation did little to put Africa on the economic trajectory.? In as much as it benefited the global south leaving Africa even poorer, it made African leaders who were stooges for the West to plunder and rape Africa’s endowed raw materials in terms of natural resource.? Hence, the IMF and the World Bank cannot help Africa toward sustainable development.? Africa’s macroeconomic success has to begin with the change of mind set in the African leadership.? Africans abroad should capitalize by sending remittances to Africa to invest in African industrial development.? The should be huge investment by African in all those so called characteristics of developing nations like over dependency on agriculture, lack of capital, poor infrastructure development and modern technology.

In conclusion, it can be summed up that Africa does not need to coat the IMF and the World Bank with their conditionalities because this route will always repeat the circle of poverty.? The new approach is to have Africa and the developing world be at the centre of decision making and to participate globally as an equal partner in setting the agenda for macroeconomic and sustainable development and economic emancipation.----------------------------------------------------------------------------------------------------------------About the Author: Dr. Francis Chisembe Chishala is currently reading for Msc International Relations with the University of East London (Unicaf).? He holds several degrees in philosophy, theology, media theory and media practice and a MA communications Management.? He studied at University of Cape Town, John Carroll University, Arrupe College and Hekima College. He currently lectures at the University of Zambia, Mulungushi University (Zamcom Campus). He holds a PHD Narrative Journalism from Selinus University of Literature and Social Sciences. He is enrolled for a Doctor of Business Management: Communication Management with the Swiss Distance Business School (SDBS). (November 2023).?

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