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24.03.2004 Business & Finance

How The IMF's HIPC Has Failed Africa

By SACOBSERVER.COM WIRE SERVICES

(PNS) - A recent IMF study revealed the failure of one of its initiatives for Africa called "Heavily Indebted Poor Countries." Its failure provides support to those who say there should be a greater role for Africa in establishing policies and programs for economic development in the continent, according to a variety of widely read news sources out of Africa.

Recent failures of International Monetary Fund programs have given African critics ammunition for expected protests April 24-25 of the meeting of the IMF (International Monetary Fund) and World Bank in Washington, D.C.

A report in Public Agenda of Accra, Ghana said thousands of demonstrators are expected to protest policies which they say are disastrous for developing countries

The Public Agenda also said the IMF policies are not working.

"In exchange for credits, borrowing nations are required to commit themselves to implement fiscal discipline, trade and financial liberalization, tax reform and privatization of state enterprises opening their very limited markets to competition from more advanced societies." But critics say that the policies cause more poverty and environmental destruction.

An IMF working paper admitted that its initiative for Heavily Indebted Poor Countries began in 1996 had failed to produce the hoped for results. Twelve heavily indebted African countries - Benin, Burkina Faso, Cameroon, Ethiopia, Ghana, Malawi, Mali, Mozambique, Senegal, Tanzania, Uganda, and Zambia - were selected for the study. With money saved from the suspension of debt, the countries were supposed to increase their spending to attack poverty, including such projects as building schools.

The study showed that current levels of spending could push them back into debt. The study authors said the countries could scale down their sending, raise more revenue within the country or secure foreign aid grants, all alternatives that had potentially undesirable consequences.

In South Africa's Business Day, Nasreen Seria reports that South Africa's finance Minister Trevor Manuel said that reforms such as privatization might fail because of weak regulatory capacity, immature institutions and thin markets.

Manuel said the IMF and other international bodies needed more input from developing countries. "If [the IMF and others] do not represent the voices of the poor and marginalized they [are] unlikely to correctly analyze the policy choices that can be used to address the concerns of the poor and marginalized," he said.

The Public Agenda said that Ghana took the advice of the IMF to grant mining concessions to foreign mining countries. But the countries retained most of the earnings while doing great damage to the country's tropical forest and local communities by contaminating water supplies.

The Post of Lusaka, Zambia noted the failure of privatization of mines in Zambia. The main cause is the failure to gain domestic and foreign investment. They also said there was a need to include privatization in a comprehensive economic development plan. As it stood it was an "ad hoc" solution and subject to exploitation by corrupt politicians.

Well-documented failures such as the ones in Ghana and Zambia provide ample fuel for protestors who plan to make their case April 24-25. The protestors have long said that the IMF/World Bank policies protect Western investors rather than support poor countries.

The IMF policies, said the Public Agenda, result from the domination of the so-called G7 group of rich nations. The United States has 17.3 percent of the votes and North American and the European Union more than 50 percent, so Western financial and economic interests prevail at the IMF. This news analysis, compiled by Donald Brown, comes special to NCM from The Post, The Public Agenda and South Africa's Business Day

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