The Economist says bad IMF days back in Zambia

The Economist says bad IMF days back in Zambia

 

Zambians have good reason to distrust the IMF. In the 1990s, under the fund’s guidance, their government cut spending, scrapped subsidies, liberalised the exchange rate and privatised over 200 state-run firms. This “structural adjustment” was painful: employment shrivelled and, by the end of the decade, income per person had shrunk by 8%. In the words of Binwell Sinyangwe, a novelist, “they were the years of money first or else no friendship”.

So it was with some trepidation that Zambia welcomed an IMF mission, which concluded on June 10th. As in the 1990s, Zambia has been hit by plummeting prices for copper, its main export. The proposed package, which is likely to be finalised over the coming months, could be worth $1.3bn, which would be the

The retro feel extends across Africa, where GDP grew last year by 1.4%, the slowest rate this century. Ghana agreed on a three-year IMF bail-out in 2015. Oil exporters in central Africa are looking for help. Ivory Coast, the region’s second fastest-growing economy, is in a programme. In all, 19 sub-Saharan countries have borrowing arrangements with the IMF; many have been plagued by high debts resulting from public-spending binges.

Some things have changed, however. “Structural adjustments?” said Christine Lagarde, the fund’s boss, in 2014. “That was before my time.” The talk now is of more flexible conditions and of countries taking the lead in their programmes. In Zambia some sceptics are being won over: Alexander Chikwanda, the finance minister until last September, comments that fund staff are “not as theological” as before. A new IMF paper notes that, since 2010, almost all its programmes in poor countries have included some kind of social targets, such as spending floors for health care and education. In two-thirds of cases those targets were met.

Not everyone is convinced by the fund’s new cuddliness. Social targets are often non-binding, pointed out a study by Cambridge University academics in 2016. Whenever deficits are reduced, someone has to lose out. In Lusaka, Zambia’s capital, shopkeepers moan about cuts to fuel and electricity subsidies, made in anticipation of an IMF deal. Trade unionists are “apprehensive”. Civil activists note that cash-transfer schemes, on which the fund is keen, reach only a fraction of the poor.

Indeed, signs of a rapprochement may say more about Africa than they do about the IMF. Governments these days are more market-friendly. Countries from Senegal to Uganda have sought advice from fund economists; Ivory Coast has an ex-IMF staffer as its president. One Zambian official sees a fund programme as an “investment in perception”, signalling to capital markets that things are back on track.

It doesn’t always work. Last year the IMF suspended lending to Mozambique over $1.4bn of hidden debts. Its presence in Ghana did not prevent a $1.6bn budget hole. And in Nigeria, which has long resisted IMF financing, the old stigma remains. Muhammadu Buhari, its president, blames a fund-inspired devaluation for a coup against him back in 1985. Seun Kuti, a Nigerian singer, is pursued by a horde of briefcase-wielding zombies in the video for “IMF”, a 2014 hit. “The fool IMF no know what’s best for me,” he sings.

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