IMF Helping Africa Through the Crisis

By Antoinette Sayeh

I believe that Africa’s needs must be fully reflected in any global response to this unprecedented recession. With similar intentions, leading policymakers and stakeholders in Africa gathered in Tanzania last March to discuss how to work with the IMF on this. Under the leadership of President Kikwete and IMF Managing Director Strauss-Kahn, the participants agreed to build a new, stronger partnership.

More than just rhetoric, these common goals included the IMF seeking more resources for Africa and reacting more rapidly, responsively, and flexibly. While much remains to be done, I think it is a fair to say that we have achieved a remarkable amount on both fronts—more in fact than I could have imagined when I started in my job just a little over a year ago.

My colleague, Hugh Bredenkamp has done a fine job detailing the IMF’s response to the needs of low-income countries. In  this post, I would like to talk a little about what it all means for Africa.

Sorting cashew nuts in Tanzania

Sorting cashew nuts in Tanzania

As a reminder, the IMF agreed to mobilize $17 billion through 2014 for lending to low income countries, mostly in Africa—trebling our lending capacity to these countries. This goes far beyond the promise given by our Managing Director in Tanzania to seek a doubling of concessional resources. The financial terms of IMF support have also become more concessional, with zero interest until the end of 2011, and will remain more concessional thereafter.

And the IMF has moved quickly to deploy these resources in Africa. Among international institutions, it has an extraordinary capacity to react early to a country’s needs, as I know from my own experience as a policymaker in my home country of Liberia. Indeed, in the first eight months of 2009, we committed over $3 billion in new resources to countries in sub-Saharan Africa, trebling the total stock of outstanding commitments this year alone.

Addressing different needs

Plus, as Hugh explained, the Fund is also working to better tailor this financing to the needs of the countries. Different countries have different needs. Even before the recent overhaul, we had committed this year to quick, upfront, and concessional lending of about $1.5 billion to 8 countries with immediate, shorter-term needs. These countries are generally stable, but have been hurt by falling exports, tourism and capital inflows. Examples include Cameroon ($150 million), Democratic Republic of Congo ($200 million), Ethiopia ($240 million), Kenya ($175 million), Mozambique ($175 million), and Tanzania ($340 million). We are also lending a further $1.5 billion to 8 countries with longer term financing needs—these countries include Cote d’Ivoire ($560 million), Ghana ($600 million), and Zambia ($265 million).

The reforms call for the Fund to respond flexibly as well as rapidly. In four cases, countries qualified for rapid access based on current policy measures. For others, structural conditions have been re-focused on core objectives and will be evaluated on a holistic basis rather than strict compliance with specific conditions. An ongoing review of the debt sustainability framework should take account of the diversity of debt profiles in African countries.

Another critical area lies in helping Africa build more capacity to weather the storm. Strengthening capacity for macroeconomic management in Africa remains critical. Given the effects of the crisis, we have seen a marked increase in requests for assistance related to domestic revenue mobilization, including from the exploitation of natural resources. We hope to meet these increased demands while continuing to focus on improving countries’ budget processes.

Regional technical assistance centers

An increasing share of our capacity building is being delivered through our three African Regional Technical Assistance Centers (AFRITACs). Countries say they like the centers’ proximity, and the fact that all stakeholders play a role. To build on this successful model, we are aiming to raise more funds to scale up the existing centers and establish two new ones, which will enable us to extend coverage to all of the countries in the region. We are also continuing to support capacity rebuilding efforts of post-conflict and fragile states—something important to me given my own experience. This year, the countries receiving intensive and wide-ranging technical assistance include Burundi, Democratic Republic of Congo, Liberia, and Zimbabwe.

Overall, I feel the current crisis is showing the Fund at its best—as a dedicated, highly professional institution that is able to respond quickly to the needs of its members. And I am pleased that, under the leadership of Dominique Strauss-Kahn, the IMF is keeping attention focused on Africa’s needs, even as larger, higher-profile economies dominate the global headlines. Now, we must continue to live up to the high expectations that we have raised for our partnership with Africa.

9 Responses

  1. Gone are the days when everything used to be blamed on our Africa governments for failings of the economy and poverty. Isn’t it interesting to note that regardless of decades of loans, policy advice, SAPs and donor aid Africa has actually become worse-off.

    instead you have dictated the privatisation of basic services and encouraged globalisation of business. the ruthlessness and disregard for humanity has been clearly outlined by the greedy practises of western businesses which the imf and world bank are forcing into our through neo-liberalism.

    fortunately we are begining to know your organisations for what they really are. dont lie to us about development because that is the last thing you want out of africa.i

  2. Gone are the days when everything used to be blamed on our Africa governments for failings of the economy and poverty. Isn’t it interesting to note that regardless of decades of loans, policy advice, SAPs and donor aid Africa has actually become worse-off.

    instead you have dictated the privatisation of basic services and encouraged globalisation of business. the ruthlessness and disregard for humanity has been clearly outlined by the greedy practises of western businesses which the imf and world bank are forcing into our through neo-liberalism.

    fortunately we are begining to know your organisations for what they really are. dont lie to us about development because that is the last thing you want out of africa.

  3. What about Mozambique?
    What’s IMF’s policy on the debt relief for Mozambique, a country heavily in debt?

  4. Dear Mr. Al Atrash:

    Many thanks for your reply.

    Bottom line: my points still stand:

    a) The Fund is guilty of abusing the ‘good faith’ repayment mechanism with regards to Sudan for country’s with unsustainable debt arrears; i.e. the IMF has recovered a cumulative $1bn from Sudan since the early-mid 1990s which, as you know, are mainly fines on late interest repayments (not principal). Compare and contrast the Fund’s approach to dealing with Liberia’s debt obligations to the Fund, where the government there effectively paid back zilch (i.e. the Fund gave Liberia a loan to pay off its debts to the Fund – sweet!);

    b) Sudan remains stuck as the proverbial hamster on the wheel – at huge cost to ordinary Sudanese – by continuing to make repayments to the Fund on an odious debt without even a cast-iron guarantee/assurance of receiving fresh IMF loans in the future;

    c) Cancellation/forgiveness of Sudan’s outstanding debt arrears to the IMF would hardly break the Fund financially. Those arrears have long been provisioned for – plus see point ‘a’ above. In other words, it’s the political (not financial) choice of the IMF to go after Sudan for those debts, which is unconscionable; funny how the IMF has agreed to roll over debt repayments elsewhere – so why not Sudan???

    ; and

    d) At a time of the biggest shock to the global economy since the Great Depression, there is/will be a net foreign exchange outflow to the IMF in 2009 from Sudan rather than the other way round as in other Sub Saharan African countries. Nice.

    So, no point defending the indefensible. Sudanese are quickly losing patience with the lack of equitable treatment – and material deprivation – from the IMF and its Executive Board of Directors.

    We ordinary Sudanese want – and deserve – debt relief from our bilateral and multilateral creditors NOW. We will not stay silent for much longer. Empty platitudes of support for this cause (debt cancellation and equitable treatment from the IMF and Sudan’s other main creditors) just don’t cut it anymore.

    Best regards,

    Ibrahim Adam

  5. I’m from Sudan – the biggest country in Africa – and the IMF is doing zilch financially to help it through the crisis; au contraire, the Fund has asked Sudan to step up its repayments this year on its approx US$1 bn debt to the Fund (mostly arrears on interest repayments and an odious debt incurred during the Nimeiri government of 69-85).

    See this latest IMF Country Report on Sudan, published in July 2009, for further details: http://www.imf.org/external/pubs/cat/longres.cfm?sk=23116.0

    That’s hideous behaviour by the IMF Board of Executive Directors; fancy ordinary Sudanese de facto subsidising IMF crisis-related loans to their much wealthier counterparts in Iceland, Hungary, Ukraine, Czech Republic etc – which is what’s happening!!

    • Response by Hassan Al-Atrash, Division Chief for Sudan at the IMF: Thank you for your comment. Let me start by stating the obvious. Sudan has large arrears to the IMF–about US$1.5 billion, by far the largest of any country. As a cooperative financial institution owned by its 186 member countries, the IMF cannot lend to a country in arrears because these arrears weaken the institution and prevent the IMF’s resources from being used to help other members.

      Still, the IMF has been very active in providing non-financial support to Sudan, both in recent years and during the current global financial crisis. In particular, it has provided policy advice to promote macroeconomic stability and sustained growth; contributed extensive technical assistance and training to strengthen institutions and promote capacity building; and coordinated with donors in identifying development needs and canvassing financial support. The government’s implementation of reform, reflecting its own strategy and the IMF’s advice, has contributed to a marked improvement in Sudan’s economy. Average inflation has dropped from over 100 percent in the mid 1990s to less than 10 percent in recent years while real GDP growth doubled from about 4 percent to 8 percent–placing Sudan as one of the top performers in the region.

      During the current global crisis, the IMF has assisted the authorities to design a comprehensive package of reforms that have helped arrest the rapid loss in the country’s foreign exchange reserves. The main objectives of these reforms are to (i) maintain macroeconomic stability, a pre-requisite to protecting the most vulnerable segments of the population; and (ii) safeguard and rebuild foreign exchange reserves to avoid an abrupt and costly external adjustment.

      Its also worth mentioning that the IMF agreed to much lower repayments from Sudan, from US$50 million in 2008 to US$10 million in 2009.

      This is not to imply that all is well. Indeed, a recent Household Health Survey shows that, despite improved economic performance, poverty is still widespread and the level of human development remains low, particularly in areas that have been beset by conflict. We recognize that Sudan’s enormous potential will not be achieved without debt relief from its main creditors. The IMF will continue to work with Sudan and its creditors towards meeting this objective.

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