Tag Archives: Poverty

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. 

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