An Unholy Alliance: Africa and the IMF

Africa and the International Monetary Fund (IMF) have had a complex relationship over decades. It is akin to family members quarreling with one always going to the other for assistance. In other words, it is the classic case of “can’t live with them, can’t live without them.”

The IMF was the brainchild of 44 leaders of the Bretton Woods Conference in New Hampshire in the United States. The IMF was created in 1944 to give loans to overcome short-term balance of payment deficits. The leaders feared an unregulated global market would mean a return to depression, poverty and possibly another world war. Today, though, some have argued that the IMF and its “twin brother” the World Bank have outlived their intended purpose. They argue that these institutions have become a rubber stamp for the Global North. Their economic policies influence countries in the Global South. The region most affected is Africa. The IMF has forced African governments to open their economies to foreign penetration. They have also increased exports of primary goods to wealthy nations. These steps, among others, have multiplied profits for multinational corporations. Meanwhile, they have subjected these countries to abject lack, unemployment, malnutrition, illiteracy, and economic stagnation.

Structural Adjustment Programs (SAPs) instituted by the IMF have forced African governments to create conditions that favor multinational corporations. The IMF considers these SAPs as “restoring confidence” in the economy. However, in the streets, they are called austerity and hardship. In other words, many of these policies hinder people’s access to food and clean water. They also affect access to shelter, health care, education, and the right to organize. Ethiopia’s new fiscal budget has come under heavy criticism by many of the country’s policy and political actors. Some have referred to it as an “IMF-driven” budget, which places untold economic burden on the taxpayer. They argue the government’s budget ignores the harsh economic realities. It seems to kowtow to the dictates of the IMF.

In fundamental ways, the IMF undermines democracy. Their conditional lending sets a framework for developing countries’ economic policies. This occurs irrespective of the preferences of the populations. It also disregards national conditions. Policies pushed by the IMF on debt-strapped African countries have severely affected the health care systems. The IMF has done more harm than good to the continent. It is time for African governments to detach from this dependence. They must start by putting their financial houses in order. This includes effectively tackling the canker of corruption, fraud, waste, and abuse in the public sector. Strengthening and empowering the institutions of government. Investing in human capital, infrastructure and local industries.

Former United States President Barack Obama visited Ghana in 2009. During this historic visit, he said, “Africa does not need strong men, but strong institutions.” Building strong and independent public institutions are crucial. These are some of the surest ways of placing the continent on a solid economic footing. Many African governments have been running to the IMF for economic bailouts due to bad governance and economic stewardship. Countries including Egypt, Ghana, Kenya, and Angola have been to the IMF umpteen times over the decades. They account for close to 50% of IMF lending to Africa. Ghana, presently, is in a Structural Adjustment Program with the IMF due to balance of payment deficit and skyrocketing debt. This is Ghana’s 17th engagement with the Bretton Woods institution. A country like Ghana, with all its mineral and natural resources should not be frequenting the IMF for bailouts. Africa does not need the IMF. It has the wherewithal and resources to stand solidly economically. What the continent needs is visionary, bold, and effective leadership.