Malawi’s love-in with the IMF could end in tears, againBy LEE MWITI | Thursday, May 31 2012 at 19:22
Malawi’s Joyce Banda should be careful what she wishes for.
While a succession of reversals of bad policies championed by her Jekyll-and-Hyde predecessor have been well received, it is the early May devaluation of the country’s currency at the behest of the International Monetary Fund that has been the most eye-catching, given the impact it would have on the country’s fiscal policy and money markets.
Malawi, perhaps more than any other country in the region, has for long been putty in the hands of donors, in what has often seemed an abusive relationship.
The kwacha devaluation had been a key IMF demand in a narrative that uncomfortably reminds observers of the ill-advised Structural Adjustment Programmes (SAPs) of the 1980s and 1990s that sent many African economies to the High Dependency Unit.
It had the immediate effect of sending Malawians scampering to the shops to stock up on basic goods, while opportunistic traders tried their hand at hoarding in the hope of reaping from the panic-buying.
Mrs Banda had few options, however, as a deteriorating economy that bred shortages of fuel and foreign exchange forced her hand. She has also had to woo back donors that had, turned off by former President Bingu wa Mutharika’s erratic policies, withdrawn or cut much needed developmental and budgetary aid.
Mutharika had a tempestuous relationship with the IMF and the World Bank, which in his second term deteriorated to such a level that he was a regular target for proponents of the aid-for-development mantra, many of who referenced him in less-than-flattering terms. (The former World Bank official and UN technocrat did have the last laugh, turning the previously basket-case country into a regional bread-basket, albeit with a healthy dose of subsidies.)
The IMF says part of the medium term plan is to make the southern African country’s exports cheaper and reduce reliance on imports, in the process freeing some much-needed foreign currency.
Yet, as the Independent’s Johann Hari brilliantly outlined in this article, (before he took time out) it was the same IMF that precipitated Malawi’s unpreparedness for famine at the turn of the last decade, forcing it to pay off loans (ironically advanced to it by the same institution) by selling its strategic grain reserves.
Action Aid, the leading help provider on the ground at the time, concluded the IMF “bore the greatest responsibility for the disaster” that was the 2001 famine, with at least 1,000 starving to death.
In April, the aid organisation’s Sierra Leone office released a report that accused the IMF of fuelling poverty in the West African country.
The Sierra Leone: IMF Crisis Solution Report conducted last year, revealed that those familiar with the Fund`s work had little or nothing good to say about its activities in the country.
"People are of the opinion that if the policies suggested by the IMF and implemented by the Government of Sierra Leone have still not improved the living conditions of Sierra Leone, a country considered resource rich and which should have no business with chronic persuasive poverty, then the relationship is problematic," the report said.
Sierra Leone was in 2010 forced by the IMF to tighten its fiscal policy and cut budgetary spending, leading to a near national strike action.
The impact of the SAPs on poor African countries has been well documented by analysts such as William Easterly in The White Man’s Burden and, with the IMF’s increasing presence in Malawi, history looks to be repeating itself.
Mrs Banda would do well to remember the past.
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