Opinions Sat, 10 May 2014

Why must we see IMF-World Bank as the only answer to Africa's fiscal crisis

...Cut the waste!

Folks, I was completely flabbergasted to read the headline “Ignore TUC’s caution against IMF bailout – Prof. Baah” which appeared on ‘Ghanaweb’ on Saturday May 3, 2014. The story alleges that the Head of the Political Science Department of the Kwame Nkrumah University of Science and Technology (KNUST) in Ghana, Prof. Richard Amoako Baah, says a caution by the Trade Union Congress to President John Mahama of Ghana not to seek a bailout from the International Monetary Fund (IMF) is misplaced’: According to him, “going to the IMF for a bailout isn’t a pleasant decision but an inevitable course if the nation gets to its wits end and not even the tantrums of the TUC can stop it if the country gets there”. Really?

My first reaction was; oh! No! This couldn’t have come from a Professor of his caliber! However, when I read further down the story, I realized that Ghana is in deep trouble. The few intellectuals who are supposed to know better and come up with innovative ideas, new thinking, and new ways of doing things in Africa to salvage our ailing economies, are gradually demonstrating their congenital lack of capacity for reasoning and thinking. This reminds me of the saying that: a fool's mind is at the mercy of his tongue but a wise man's tongue is under the control of his mind.

Every entrepreneur knows that a bank loan which is well-planned and utilized meaningfully can be very beneficial to any business venture. However, if you plan to perpetually live on loans, then it becomes a passport to plunging your business in the ditch. The reason is that, you just CAN’T BORROW YOUR WAY THROUGH IN LIFE! This is straight forward and simple financial planning: you don’t need a Certified Financial Analyst (CFA) or a renowned Economist to prove that many developing nations are in debt and poverty partly due to the policies of the International Monetary Fund (IMF) and the World Bank (WB). Their programs have been heavily criticized for many years for resulting in poverty, and an increased dependency on the richer nations despite their claim that they will reduce poverty. In other words, the IMF and WB have forcefully demanded that poor nations lower the standard of living of their people, period!

They have utterly failed in "reducing poverty" and "promoting development" in Africa. In fact, their instrument of domination and control are in the hands of the few powerful states whose long-standing objective is to perpetuate and plunder the resources of sub-Saharan Africa (SSA) and other developing nations. In other words, the fundamental role of the “Bank and the Fund” in Africa and the rest of the developing world is to promote and protect the interests of what we call in finance as “Global Capitalism”. (Free enterprise without restrictions or when the whole world embraces free trade and free markets). These programs include internal changes (notably privatization and deregulation) as well as external ones, especially the reduction of trade barriers. Unfortunately, countries that fail to enact these programs are subjected to severe fiscal discipline. I’m sorry to say that the obvious results which are the financial threats to poor developing countries simply amount to blackmail. Trust me; poor nations such as Ghana - in economic terms (even though they are rich in all resources) have no choice but to comply. Folks, that’s the bone of contention for the retracted debate that IMF and WB are the cause of our huge debt and the unsolved vicious cycle of the fiscal crisis! I have no idea the kind of fiscal analysis that Prof. Richard A. Baah did to conclude to sightlessly that we have no choice but to go back to IMF if the need arises? We have no choice? Seriously, Professor? It all has to do with some “Fresh Thinking” and that’s what we demand from our unquestioning leaders at this point”.

Let’s face it guys: the IMF and the World Bank, through their propaganda machines, have over the years attempted to highlight their "assistance" to Africa. But in reality, since the 1970s, these institutions have gradually become the chief architects of policies, which are responsible for the worst inequalities and the explosion of poverty in SSA. Cast your mind back to their main goal in Africa and think about it in just a minute. When they began to intervene in the fiscal policies in Africa in the late 1970s and early 1980s, their stated goal was to "accelerate development", according to a World Bank document, familiarly known as the "Berg Report", published in 1981. Then again in 1999, they revised it to include poverty reduction which was even on the IMF website:

“In September 1999, the objectives of the IMF’s concessional lending were broadened to include an explicit focus on poverty reduction in the context of a growth oriented strategy. The IMF will support, along with the World Bank, strategies elaborated by the borrowing country in a Poverty Reduction Strategy Paper (PRSP).

Those of you who are old enough and witnessed the 1980s will remember vividly about one Dr. Kwesi Botwey who was the then secretary of Finance and Economic Planning in Ghana under the Provisional National Defense Council (PNDC) regime with J.J Rawlings as their leader. In the 1980s, the so called Dr. Kwesi Botwey together with his PNDC cronies tied Ghana’s hands up, and dived deep into the exploitive IMF- WB Structural Adjustment Program (SAP) which was so notorious at the time. They took advantage of the dictatorial rule in Ghana in those days and ripped the country off, by channeling a greater percentage of the IMF-WB loans into their pockets. Sadly, only a small percentage was invested in health, communication, education and the shoddy roads built which have all been deteriorated as we speak right now!

I wish I was old enough to challenge it, but unfortunately, many Ghanaians who were matured citizens and could have kicked against it, for fear or for one reason or the other, were just “halfhearted”. Today, we are all paying for this expensive prize that some of us had nothing to do with it. For over three decades of IMF-WB repressive policies, Ghana cant’ even pay her civil workers. Are we really serious as a country? As we speak today, there’s no institution in Ghana that functions well. You MUST bribe your way through to get what you need and that’s the order of the day. There are so many teachers that I personally know who have not been paid for the past two and half years or even more. Most of these IMF-WB loans were supposed to be spent to harness our abundant Energy resources. Unfortunately, I’m sorry to say that, as I speak right now, Ghana is facing serious energy crisis particularly COMMON ELECTRICITY? Where are the loans and who’s accountable for this gross mismanagement? African leaders are not that smart or have what it takes to manage any loan at all. They always end up embezzling it, so what’s the point in going for these loans that will leave our unborn kids to pact with it? NEVER AGAIN! Not in the young generation of Africans age, Professor!

Currently Ghana is in fiscal crisis! And some people are recommending IMF-WB as a last resort? Where is their thinking acumen? Please, Prof. R. Amoako Baah and all those who still think like we are in the 1980s, please go back and rethink, or volte-face and come up with something new. There are so many options out there for the government of Ghana and other corrupt developing countries to turn things around. Those of us who grew up in the 21st century High Tech world – millennial generation (generation of children born between 1982 and 2002), do not think like the baby boomers who were born in the 1950s and early 1960s, and that’s the difference in our thinking. We don’t think like the 1980 youths which I suspect you were one of them.

The good news is that; it’s not too late. If Africans can change their habit or the way of thinking and focus on solving national problems (sense of nationalism)-devoid of corruption and dirty politics, then I guarantee you, our destiny will change in about two to three decades. I can see it so clear where we wanna be and the necessary steps we MUST take. However, we can’t get there without hard work and fresh thinking. That means some of us will be hurt, but that’s the only option. The policies we have right now, it’s just a joke! And I wish everyone sees what I see. Ghana will never go back to this “financial slavery policies”, ok? We have more than enough resources to move the country forward. All we need is new thinking leaders with a vision, innovative ideas and ready to solve problems. There’s no turning back to any policies that has to do with our failed colonial policies, NO WAY! So Professor Richard A. Baah, please, the next time you speak, I wanna hear something new which no leader has ever done before. That’s the only way forward in our generation. Ghana for example; started with Malaysia and the Republic of South Korea in the early 1980s as far as the IMF-WB SAP are concerned.

Ask yourself, what happened? Well, I know the answer. There wasn’t any leader in Ghana in the 1980s and even now who thought about solving problems. Their main objective was to loot the country as much as they could. Institutionalizing corruption was the order of the day, and that’s the prize we the young ones are paying right now. Unfortunately, we’ve also been caught up with the same corrupt practices - probably in its worse form to an extent that we feel comfortable and ENJOY looting the state! Right now in Ghana, corruption is just a NORM, because the idea is that; it’s the only way you can build your own house, afford to buy a nice car, save enough money in foreign banks for future use when you are no longer in power, and finally have as many women as possible! Steal from the state, get rich, and forget about the rest of the society is the mentality of an average politician and a civil servant in Ghana and most parts of SSA.

Gloomily, as we speak today, the actual record of IMF-WB is just disastrous. The main pretext for their intervention was to "help solve" the debt crisis that hit African countries in the late 1970s, following the combination of internal and external shocks, notably sharp fluctuations in commodity prices and skyrocketing interest rates. The remedy they proposed, known as Stabilization and Structural Adjustment Programs (SAPs), achieved the opposite, and contributed to worsening the external debt and exacerbating the overall economic and social crisis.

Mental Picture of IMF and World Bank policies in sub-Saharan Africa

In 1980, at the onset of their intervention in sub-Saharan Africa, the ratios of debt to gross domestic product (GDP) and exports of goods and services were 23.4% and 65.2% respectively (Don’t worry I will explain what those terms mean). Ten years later, in 1990, they had deteriorated to respectively 63.0% and 210.0% respectively! Wow! Are you kidding me? In 2000, the debt to GDP ratio stood at 71.0% while the ratio of debt to exports of goods and services had "improved" somewhat, at 80.2%, according to the World Bank's Global Development Finance.

Remember, what those figures mean is that, the deterioration in debt ratios is reflected in the inability of many African countries to service their external debt. As a result, accumulated arrears on principal and interests have become a growing share of outstanding debt. In 1999 alone, those arrears accounted for 30% of the continent's debt, compared with 15% in the 1990s and 5.0% for all developing countries. Ask yourself, is this what we wanted from them? Hei NO! Have they been beneficial to our continent? Of course, NOT!

To compound the crisis, what do we see today? African countries are getting very little, in terms of new loans, except to pay back old debts. Between 1980 and 2000, Sub-Saharan African countries had paid more than $240 billion as debt service, that is, about four times the amount of their debt in 1980. Yet, despite this financial hemorrhage, SSA still owes almost four times what its owed more than twenty years ago. IMF and World Bank, PLEASE, GIVE US A BREAK!

Most of the foreign direct investments registered by African countries in the 1990s came as a response to privatization of SOEs. No sector was spared, even those considered as "strategic" in the 1980s, such as telecommunications, energy, water and the other industries. The process of privatization peaked in the late 1990s and ever since has leveled off, despite more deregulation, liberalization and all kinds of incentives offered to would be investors. To date, it is estimated that more than 45,000 SOEs have been sold off in Africa. However, the "gains" from privatization, projected by the WB and the IMF, have been elusive. In fact, many privatization schemes have failed and contributed to worsening economic and social conditions. Almost everywhere, privatization has been associated with corruption, excessive looting, massive job losses and higher prices of goods and services that put them out of reach of most citizens in Sub Saharan Africa.


In all modesty and fairness, I understand the complicity of the corrupt African leaders in the disastrous outcome of neoliberal policies spearheaded by the IMF-WB and other institutions known as the “Washington Consensus”. Unfortunately, many governments and senior civil servants have bought into this deceptive agenda promoted by the IMF and World Bank. In other words, they bear a great responsibility and are accountable for the current state of affairs in our continent. But the question is, can our leaders think a second and make these kind of fiscal analysis? Only God knows! In Ghana for example, currently, 8 million out of the 25 million Ghanaians find themselves in abject poverty despite all the natural and human resources endowment in the country, including oil. Here’s my suggestion that needs urgent attention: to put an end to the influence of these institutions, African social movements and the various progressive forces such as our group: “OVERCOMING THE POWER OF VESTED INTEREST AMONG AFRICAN YOUTHS”, must explore strategies aimed at promoting a new kind of leadership able and willing to challenge these institutions in favor of genuine alternative development policies. This explains why some of us will continue to write and educate the failed leaders in SSA.

I admit the fact that the IMF-WB loans may not necessarily be as evil as the available data portray in Africa. After all, it has helped some countries such as Malaysia, Brazil and republic of South Korea because they have thinking leaders. Unfortunately, in Africa, we DO NOT have the necessary human capacity (thinking African leaders) to think, plan, budget and utilize these kind of loans for the benefit of the citizens. At the end of the day, it has become a normal distressing fiscal cycle to us: That is: Borrowing-looting-corruption- poverty-fiscal crisis- then back to borrowing again, because we don’t wanna get out and can’t even get out of it. This cycle MUST be broken. That means, until we figure out how to stop the massive looting and the pervasive corruption practices which are the number one cause of our current predicament, we do not need any additional IMF-WB loans. Let’s keep working together and hopefully we shall overcome one day.

This is the ONLY REASON why I will forever miss the “show boy” - Osagyefo Dr. Kwame Nkrumah! He’s one of the finest statesmen Africa has ever had when it comes to “Thinking, self-evaluation and Vision”. Unfortunately, he will be completely devastated to realize in his grave how we’ve dived deep into colonialism once again, but this time in a modern cycle style- called “loans- corruption-debt- poverty”(LCDP). Thank you.

Peter Osei-Adjei

President and Coordinator-Web Communications

Overcoming the Power of Vested Interest Among the African Youth


Columnist: peter Osei-Adjei