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IMF and Zambia, Mission 2017, by Gabriel C Banda

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IMF and Zambia, Mission March 2017

by

Gabriel C Banda

WHILE many people have their attention focused on the Africa Under 20 soccer tournament taking place in Zambia, the IMF team has come back to Lusaka, seeking agreement over financing Zambia’s government.

As before, the arrival of the International Monetary Fund team will have great implication on Zambia’s economy and the current and future quality of life of Zambia’s people.

It will also enable us to understand how much has been learnt, or not learnt, or even unlearnt, from the experiences Zambia has had, over the decades, with IMF and its twin sister, or brother, the World Bank. It will show how much institutional and collective memories are utilised, or not utilised, in dealing with current issues. It will also reveal IMF and World Bank tactics.

                                                     World Bank, 1950s

Zambia’s relationship with the World Bank was already there in the 1950s, before independence, when Zambia was still Northern Rhodesia and neighbour Zimbabwe was Southern Rhodesia. There were some farming programmes supported.

But the big one, in 1955, was also one of the biggest in the world. This was the joint Southern Rhodesia-Northern Rhodesia Kariba Dam and hydro-electricity project, put on the Zambezi River bordering the two territories, and opened 1959. Kariba was then the biggest financing ever by the World Bank in the world.

There was a better site, at Kafue Gorge, in Zambia, yet a very costly and environmentally and socially damaging Kariba project was preferred. In 2017, close to sixty years after opening, Zambia and Zimbabwe began programmes, externally financed, to pay for the rehabilitation of the Kariba Dam wall.

(We have already written about the IMF and Zambia’s energy programme and how the World Bank, to support Zambia’s dependence on Rhodesia and apartheid South Africa, tried to prevent Zambia building the Kafue Gorge power station and, just after 2000, IMF and World Bank prevented Zesco from building some electricity generation projects, thus contributing to the vulnerability recently experienced, in 2015/2016, due to low rainfall.

IMF and World Bank are trying to promote and impose energy sector arrangements that are unstable and are costly for users. Throughout the region and beyond, IMF and World Bank have promoted, and are actually imposing, some invalid basis for the increase of household electricity tariffs).

                                                                Enter IMF

While the relationship with World Bank was earlier, Zambia’s membership of the IMF began in September 1965, shortly after Independence, October 1964.

For many years, the Zambian government did not borrow from IMF. From its own programmes following independence, Zambia had made advances in various basics, like education and training, health, and infrastructure. Quality of life increased. Life expectancy increased. Much of the resources were from Zambia’s own, with some support from partners in the West and the East.

While independent Zambia had some few helpful projects financed by World Bank on basics like shelter and schools, the first IMF lending to Zambia was linked to balance of payment pressures brought about by the Zambia-Rhodesia border closure of January 1973.

                                                                  Southern Africa struggles

Zambia, supporting independence and freedom movements in Southern Africa, was then implementing various international sanctions on neighbouring Rhodesia and apartheid South Africa. Zambia, with its big development programmes, had its economy greatly affected by the impact of the struggles for independence and freedom.

Apart from the effects of the freedom struggles in Southern Africa, Zambia was in the 1970s affected by increase in price of fuel imports. The Arab-Israeli war of October 1973 had effects on the worldwide price of petroleum. Zambia also had reduced income due to low copper prices. Zambia’s balance of payments was thus by the various factors affected.

Zambia then took its first IMF facility, of 19 million SDR (Special Drawing Rights) soft conditions loan. This was equivalent to K14.75 million Zambian currency or US $22.92 million. (The Kwacha was then stronger than the US dollar).

Then in the mid-1980s, an IMF Structural Adjustment Programme came into effect. It was meant to help pay external debt and harsh “austerity” conditions were put into place. President Kaunda pleaded for patience from the public, saying the sacrifice from austerity would lead to things getting better.

                                                                  Conditions

The IMF market forces and commercialisation programme came with particular conditions that restrained various activities. There were measures that liberalised the finance environment. Subsidies and public spending were reduced or removed. State firms were to be privatised.

Wages were frozen.  As a way of reducing costs in public service, retrenchments were done and retirement age brought forward to 55 years. Workers in government, councils, and parastatal enterprises were retrenched. Staffing establishments were reduced. These measures were to later affect institutional memory and capacities in many fields.

Schools and other institutions had maintenance staff laid off.  Councils had their staff reduced. Some important fabric components like Community Development and garbage collection were eventually reduced and even disbanded.

(The reduction of council capacities contributed to the 2017 situation were households are throwing garbage within their premises and residential areas because the commercialised and privatised garbage system is not working well for most.

Before commercialisation, garbage collection fees were added to the rent and councils, who provided the garbage service, were generally performing better in that than what is happening now. Garbage collection is a Common Good that cannot be easily carried out just by profit motivation).                             

                                                              Surgeons not Butchers

But by 1987, in Zambia, the IMF medicine, or surgery, was destroying the patient!  A true surgeon is not a butcher.  And a butcher is not a surgeon.

Thus, in May 1987, due to the worsening negative effects, President Kaunda, to prevent further destabilisation of the society, announced that Zambia was breaking away from the IMF programme while still remaining a member of the organisation.

Dr Kaunda said there was to be a home-grown alternative programme. The local “New Economic Recovery Programme” was in place in 1988. Some advances were made. But IMF, World Bank, and allied governments and institutions said there was no alternative to their killing medicine and surgery and imposed sanctions.

Through sanctions and pressures by IMF, World Bank, and allied governments, President Kaunda’s government was in 1989 forced back to some IMF programme relationship.

The hardship continued. In June 1990, with riots as a result of the IMF programme’s impact on food and basic needs, there was a coup attempt.

President Chiluba’s government that followed in November 1991 was more open and willing towards the IMF programme. In the 1990s, the programmes created much hardship in the general population.

The impacts of the 1980s and 1990s still live on in Zambia now and are in our lives in various sectors. Dubious “Health Reforms” led to the exclusion of many persons from health services and death and suffering of many persons. Maternal deaths increased. Malnutrition increased. Life expectancy declined.

                                                              HIV and IMF

The combination of IMF economic Structural Adjustment imposition with the emergence of HIV and AIDS had deadly impact.

                                                         De-industrialisation      

As in other places of the world where IMF imposed its measures, as a result of the programme, and by intention of the programme, employment in the “formal” sector reduced. The programmes led to some de-industrialisation of some societies and de-Africanisation of enterprise ownership.

                                                                Cohesion

Apart from many persons dying as a result of the measures, many persons and families went into material decline and poverty. Social stability was shaken. And social tension increased. Social cohesion was put under pressure and declined.

Many persons died as a result of the IMF measures. Protests and riots happened, with violent deaths arising. The combination of SAP measures nourished corruption.

The capacities of societies in various fields have declined. In various sectors, Zambia’s current capacities are lower than they would have been without the effects of IMF and World Bank programmes.

The IMF programmes, forcibly imposed, have been instruments of violence.  They fight the balance and integrity of life.

                                                                      Regime Change

In some places, IMF programmes have, through economic pressure and hardship, led to regime change. Governments have been voted out or removed in other ways. In Zambia, there was, in 1990, a coup attempt following riots over high food prices brought about by the IMF programme. The economic hardships experienced contributed to UNIP losing office in the elections of October 1991.

Some rulers agree to the dictatorial IMF and World Bank imposition because of fear of being removed from office.

IMF and World Bank have leaned towards politicians that can deliver economic policy and practice environments favourable to IMF and World Bank “market forces” and strong pro-business positions. Yet, we believe, both public and public sectors are needed in a healthy society.

                                                                Big Business

An extreme and strong pro-business direction may lead Zambia to the situation before 1924, when big business, the BSA Company, was government. Big business in control can decide who rules or controls a country.

                                                             Greece, Disastrous

But even when their programmes have created hardship, IMF and World Bank move away from responsibility and put blame onto the victim government and society. The IMF and World Bank enforcers have been unrepentant.

Overall, there have been bitter experiences with IMF programmes in Africa, Asia, Latin America, and even Europe, in places like Greece.

Greece Minister of Labour and Social Security told BBC Hard Talk in March 2016 that while other lenders have been considering better and more socially sustainable economic and debt measures for Greece, the IMF “insists on further measures. And it is now the IMF which is isolated, not us.”

Continues George Katrougalos: “I have the conclusion that the austerity policies applied last five years were really disastrous and we must change the mix of these policies…”

                                                              IMF in Zambia, Now

Over the recent two years, IMF and World Bank have tried to reach out to Zambia and hook a programme. There was time, especially before the August 2016 elections, those in authority, knowing the consequences experienced in Zambia and elsewhere, were cautious or even reluctant about getting involved with an IMF programme.

But IMF and World Bank are still reaching out, although they will turn things around and say the Zambian government is the one driving the interest to have assistance from them.

This will be helped by local officials calling an IMF programme “home-grown.” If an agreement is made, we do not know whether it will really be allowed to be locally visioned and driven. How far will it differ from IMF templates?

Will IMF sit back and allow Zambia’s government to drive the programme? We do not know to what extent IMF and World Bank will drive it, directly or working at the back as puppet masters. Why don’t IMF and World Bank let local persons, and whoever the local persons decide to work with, to drive their governments’ programmes?

The IMF and World Bank have taken advantage of some errors or inappropriate or inadequate decisions and actions made affecting finance and resource management after President Sata and the PF came into office in 2011.  But, we believe, the errors and their effects can be dealt with and society healed and balanced without going into some IMF programme.  An IMF programme is likely to destabilise the society.

                                                                                                                                                                                                                                                 Thirty Years Now

May 2017 marks some thirty years since Zambia’s abandonment of the harsh IMF programme.

We must accept that many persons now do not recollect the harsh mid 1980s experiences invoked by IMF and World Bank conditions. Some have forgotten, or let go, the pain and anguish. Some, a huge number, only hear stories from older persons.

Some of these persons currently are in some positions of authority and take lightly the idea of implementing IMF programmes. They do not realise or know that the measures have led to death, riots, social turmoil, and reduced capacity in many parts of the world.

Some members of staff of IMF and World Bank may not be aware of their employers’ role in bringing about great negative impact through imposed policies. Not knowing the results of the actions they are working for, a danger is that they will continue contributing to the same problems their institutions have been growing.

Ill advice from IMF and World Bank, perhaps by persons with, at best, poor understanding of local situations or incompetence when related to the situation, and, at worst, following negative interests, led to inappropriate IMF measures that greatly affected quality of life and capacities of societies.

                                              Organised Hold

The IMF and World Bank continue to have influence on governments through some very organised ways. They have cultivated some sympathisers and agents, in key positions, who will influence their governments and institutions to have relations with IMF and World Bank, even where it is not necessary and will lead to negative consequences.

The IMF and World Bank have put a foot hold into governments by continuing to provide small loans and grants that enable them to stay around and have presence in government policies and programmes.

In Zambia, and other places in Africa, IMF and World Bank have penetrated the energy sector, with its huge potential, and are trying to influence it, even by doing projects with energy generators and energy regulators.

IMF and World Bank are compromising energy regulators, to switch off their role dealing with fairness between energy providers and users, so that the desires of the IMF and World Bank machine are imposed, leading to control of the energy sector by those friendly to the spirit of IMF and World Bank.

                                                                         NGOs

And years before, NGO and Civil Society organisations, including churches, were active in issues of people’s quality of life and did much to campaign against debt conditions. This was done, and to some extent achieved, through activities like The Jubilee Campaign.

These days, civil society and NGO organisations are silent on the effects of IMF and World Bank programmes. Some civil society and NGO organisations receive funding for their activities and thus will not criticise IMF and World Bank for impact of their programmes. They are embedded with IMF and World Bank.

Some organisations do not only avoid criticising IMF and World Bank, but will actively support the imposition and implementation of IMF and World Bank programmes. They will side against governments and take IMF and World Bank as their kith and kin.

Sad is that IMF and World Bank come back and forth and many times do still manage to hook governments into activities that are destructive of economies and society. IMF and World Bank bondage techniques continue to work, leading to enslavement of governments and needless hardship in societies.

Sad that those who survived the shackles and sharp blade of Shylock the money lender will some years later go back to the same Shylock, who still insists on the pound of flesh that will also drain blood from the organism.

                                                               Alternatives

Actually, there ARE alternatives, if you open up your mind. There are alternatives to IMF and World Bank programmes. And there ARE alternatives to getting support, lending or grants, to move out of economic situations. The situation now is not that of the 1980s and 1990s IMF and World Bank monopoly and bullying.

But as IMF and World Bank fear that more and more persons and governments will be seeking assistance and links elsewhere, they are getting more active in reaching persons and institutions they can use to influence the direction of governments and societies.

And a question must continue to be asked: with all hardship from the IMF and World Bank programme self-evident over the decades, and knowing that implementation is even dangerous for their societies and governments, and added the fact that there are alternatives to the conditions and partner helpers or lenders, why do governments still, even in 2017, go to IMF and World Bank for borrowing?

As the Africa Under-20 soccer tournament progresses in Zambia, let us also keep our focus on the IMF-Zambia ball play.

ginfinite@yahoo.com

February, 2017, LUSAKA

 The author is involved in Writing and the Arts, Social Development Work, Social Research, and observation and analysis of Conflict and Peace issues. For over three decades, he has researched and written extensively on basic needs and economic policies, including economic adjustment programmes. This piece is some summary of the writer’s more detailed writing on the issue. 

Greece Debt Measures and Us, A View from Africa, By Gabriel C Banda

Greece Debt Measures and Us,

A View from Africa

Gabriel C Banda

By

Gabriel C Banda

THE recent situation of Greece and the referendum on further austerity measures for further lending by IMF and Europe governments is a major development in economic relations and, generally, human relations in the world.

Greece’s government and many in the population felt that the measures imposed by Greece’s lenders and anchored by the International Monetary Fund, IMF, were too strong and brought about great hardship.

In the five years of austerity measures imposed by lenders, unemployment increased, incomes were reduced, access to basics was reduced, and, for many persons, hardship set in. The young, the pensioners, whose incomes were reduced, and others in society have been greatly hit.

The IMF and European lenders insisted on harsh measures before Greece can get more loans to help overcome the harsh economic situation, much of the situation brought about by the loan conditions imposed by the lenders.

The government of Prime Minister Alexis Tsipras, with his passionate finance minister Yanis Varoufakis, put to a national referendum the question of going through further harsh economic measures. The result has been a big “No.” Most people in Greece do not want the harsh measures.

Now, some officials from the lenders are upset with the Tsipras administration while some officials reluctantly say they recognise that the No had expressed democratic voice but it may not be easy to work on different measures. What has followed is Greece’s government and lenders sizing each other to have their way.

Greece is saying they will only agree to some reforms that are socially fair, healthy, and sustainable. They do not want the destructive economic policies that have greatly impacted their society and other people.

However, many officials from the lenders have continued saying there is no alternative to the harsh measures. Some even bring out their personal stereotype negative attitudes towards Greek persons. They consider Greece a burden that may need to be dropped.

In the negotiations that cannot be avoided, both sides will bring out various tactics and dynamics. Both Tsipras and lenders will be sizing up, reacting, and playing to each others’ positions while also considering the positions and attitudes of their populations.

                                                        Greece and Unlikely Exit

However, it will involve a lot of adjustments if Greece ends up leaving the Eurozone, and possibly the European Union. The lenders should not be in denial and cheat themselves into believing that a Greece exit will have minor effect on the Eurozone and the European Union. They should also think about NATO. Economies and people in the region and beyond will be greatly affected.

Actually, I believe it is not in the interest of the lenders to have Greece exit its common monetary bonds with other Europeans. Many things unknown will come into play, affecting the other Eurozone and European Union members. Already, the position amongst the creditors’ bloc is not unanimous. Some are concerned about Greece possibly falling away, something they would not like, and are prepared to come to some settlement with Alexis Tsipras and team.

                                                                       IMF Consistent

But the current standoff involving IMF, lenders, and borrowers is not new. At various stages of their debt relationship, from the time of negotiation for first lending to implementation and review for further loans, IMF and lenders have applied pressure on needy borrowing governments.

What IMF and lenders are doing over Greece is consistent with their bullying actions on governments in Africa, Asia, Latin America, and other places. What is significant is Greece standing up to IMF and creditors and refusing to bow to pressure for further destructive conditions.

This Greece position of courage and bravery is significant not because others before them have unwillingly followed IMF, but because the sanctions and consequences imposed on dissenting governments by the consortium of IMF, World Bank, and lenders have been harsh and meant to make governments yield even when it is known the imposed measures have been very destructive.

                                                           IMF and Zambia

Another case of standing up to IMF, World Bank, and lenders happened in Zambia in May 1987. President Kenneth Kaunda announced that the IMF and World Bank “Structural Adjustment Programme,” SAP, measures had brought deep suffering to the population. He said Zambia was breaking off from the programme while retaining membership of the IMF organisation. He said Zambia would still service its debt, but in a manageable way that did not bring great social hardship.

From imposition of the austerity measures, suffering of Zambia’s people had even increased. The society was unstable. Zambia had reduced gains made from independence in 1964 in fields like health, education, and access to basic needs. Life expectancy fell. Infant mortality increased. Maternal mortality increased. Malnutrition increased. Deaths increased. Zambia’s capacity in many fields was declining. Structural Adjustment was a killer. In fact, in 1986, there had been riots over food when IMF and World Bank economic measures, imposed to service debt and reduce budget deficit, reduced people’s quality of life and access to basic needs.

Back to that time in May 1987, Dr Kaunda said Zambia would cut off from the IMF programme and implement its own that would lead to growth. Local economists, advisors, and persons from various sectors got involved in making the home-grown programme. When it was implemented, Zambia recorded some growth.

But the IMF and World Bank took on some position of ensuring that Zambia would be put under great economic pressure and get back to an IMF programme. IMF and World Bank acted with other governments to put economic sanctions against Zambia. Even governments that were friends to Dr Kaunda and Zambia abandoned the African government and fell in line with the IMF sanctions position. Even respected Gro Harlem Bruntland’s Norway administration acted with IMF and World Bank against Zambia’s position of abandoning harsh Structural Adjustment measures.

Kenneth Kaunda’s government was isolated. Many rulers of governments, sympathetic to fellow governments undergoing harsh economic measures, are silent. They fear receiving collateral economic pressure on them, with that pressure leading to unrest and removal of their governments from office.

In this inter-dependent world, no government or society can live without the support and collaboration of others in the world.Eventually, without practical support from friends who may have been sympathetic but fearing to oppose IMF and World Bank, in order to survive, Zambia was forced to get back to some IMF and World Bank programme. In June 1990, under continued economic austerity, further riots took place, leading to an unsuccessful coup attempt.

                                                                 Integrity of Life

In many places, SAP and austerity conditions have acted against peace and stability. The austerity conditions fight the integrity of humanity and life itself. The programmes to be followed were harsh. The debt service interests, ratios, amounts, and other conditions were unfair. Many people have suffered and died from IMF programmes. The austerity programmes lay seeds of discord and violence.

People have reacted through protests and violence. Protests and unrest have happened in Africa, Asia, Latin America, and even Europe. Many in Zambia, Africa, and elsewhere have died from protests against governments and harsh economic conditions.

When things do not work out or have created further problems, IMF says the medicine is still on its way to working, that there was light at the end of the hardship tunnel, or that instructions have not been well followed by the government. They turn around and make the governments take the blame.

Due to the harsh austerity conditions, some governments are voted out by their citizens. The new government, often by those who were critical of the conditions brought about by harsh measures, ends up also following the IMF and creditor conditions. Complaints continue while IMF watches in the background, shielded from their contribution to the situation of hardship.
Referendum has Worked

Thus, Greece’s current situation is interesting for the whole world. It is a landmark for debt and financial relations involving governments and lenders, multilateral or individual governments. Greece getting a fair deal, that allows a programme to be done with minimal impact on members of the public, especially the vulnerable ones, will encourage others to also be courageous and decline or renegotiate IMF and creditors’ conditions.

In many ways, Greece has won some renegotiation. The referendum of 2015 has worked. Of course, IMF and the creditors will try to show that the lenders are in control of the situation and are continuing to push Greece to debt service and restructuring. But the reality is that Alexis Tsipras, Yanis Varoufakis, their team, and the people of Greece have won the advance towards renegotiation of the loan and debt conditions.

Used to bullying and twisting others, IMF and creditors had not expected the referendum tool to come up. When it did, they were wishing, against reality, that Alexis Tsipras would be shown to be unreasonable. Media said there was a tie between Yes and No support while the truth was that an overwhelming number of persons was against the measures.

The referendum tactic worked well. Alexis Tsipras and Yanis Varoufakis showed that they had significant numbers of their fellow citizens behind them. They show that even when abandoned by IMF and the Eurozone system, Greece will for some time receive the support of its public in other alternative programmes that may be embarked upon. Public support is important for any political or economic decision.

Most people in Greece had experienced so much hardship that they were prepared to endure the consequences of creditors’ sanctions than continue suffering. It is better to suffer and assert your human dignity than to continue being enslaved.

In other countries facing harsh IMF conditions, there has been no referendum on whether to follow or continue with IMF programmes. The programmes to be followed were harsh.

                                                        Greece Turning Point

The Greece experience of 2015 should mark some turning point in IMF, World Bank, lenders, and borrowing governments. The experience shows that it is possible, as Dr Kaunda did in 1987, to stand up to the bullying and thug behaviour of IMF and World Bank. Further, it is possible to get citizens openly participate in the decision about the way forward. With people’s voices openly registered and measured, the IMF and World Bank will fail the moral test.

                                                                                Shylock

The IMF and World Bank have been like Shakespeare’s Shylock. Shylock wanted to cut a pound of flesh, as agreed, from his defaulting debtor. But the problem was that cutting the pound of flesh was going to make the debtor lose blood. Blood had not been written into the loan and debt service contract. It was thus difficult to implement the pay back of flesh. But the history of IMF, World Bank, and some lenders has been that of cutting flesh with the blood in it. Societies have suffered.

Many societies of Africa are still handicapped by the forced IMF and World Bank measures of the 1980s and 1990s. The societies would have been stronger had they not been shaken down by the economic measures.

The frustration and even annoyance with which some creditor officials have in recent days responded to Greece people’s majority choice for “No” about continuation of austerities is example, though mild one, of how IMF and lenders have responded to Africa’s governments.

                                                                Stick

There are similar tactics of using a stick to try to bring governments back in line to the harsh policies and conditions the lenders, falsely or by error, say have no alternatives. IMF and creditors impose harsh measures. Then they insist on continuation of harsh programmes even when there is decline in quality of life.

They continue to say the harsh medicine is path to recovery. They punish governments refusing to further punish their people, punish them by refusing further funding.

The IMF and creditors will also make lenders and non-lenders not to do businesses with the dissenting borrower. IMF and lenders act as consortium and cartel imposing sanctions on some dissenting government.

SAP works through dictatorship. SAP is dictatorship. SAP has been imposed through the dictatorship of the IMF and World Bank against unwilling governments and peoples. IMF officials impose harsh measures against fellow human beings who are considered objects. One is not sure the IMF officials themselves can comfortably live under the conditions they subject their fellow brothers and sisters in many parts of the world.

                                                               Alternatives

Actually, there ARE alternatives to IMF programmes. Saying “there is no alternative” is narrowness and blocking creativity in self and others. It acts against the possibilities and progress of humanity. Currently, in Britain, the Conservative government, with a huge budget deficit, a deficit bigger than Greece and other European governments added on, is thinking of budget cuts for some items but, wisely, will not touch health and education.

Governments of Africa and other places were forced to cut spending on essentials, including food, education, health, and other basics. This contributed to capacity difficulties whose effects are still with us now and societies are still to recover from.

The Greece referendum of 2015 reminds us that economic austerity measures mainly work through imposition and dictatorship. In many countries, put to some vote, the measures would have been rejected. IMF and World Bank would have been forced to support more sustainable alternatives.

The Greece debt situation also reminds us that governments can be strong. Factors at hand will move towards some settlement between Greece and creditors. That will be healthy for all parties involved.

From the Greece experience of 2015, IMF and Company will now fear that other governments will follow Greece and now start invoking referenda. Should this not be some fair direction in democracy and governance by consent and participation? For instance, if it seems very contentious, shouldn’t people in other European societies have the right to vote on whether there should be landmark cuts on social welfare?

The IMF and creditors should also remember that now there are other significant governments and organisations that provide grants and loans at fair conditions. The current Greece debt situation shows us that the IMF, World Bank, and other creditors can no longer continue to intimidate and coerce governments and societies of the world. Shylock does not always win.

Contact email: ginfinite@yahoo.com

Based in Lusaka, Zambia, the author is involved in writing and the arts, social development, and peace issues. He holds an MA in Peace Studies, University of Bradford.

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GCB, June/July 08th, 2015