Today in Africa, around twenty countries are over-indebted or at risk of over-indebtedness, some of which have defaulted on the repayment of their multilateral debts. A situation that owes a lot to IMF policy.
The International Monetary Fund (IMF) was established in 1944 at the United Nations Monetary and Financial Conference. The first goal of the IMF was to “guarantee the stability of the world economy”, by limiting the fluctuations of currencies on the foreign exchange market. Bringing together 190 countries today, the IMF, with its sister bank, the World Bank, interferes without complexes in the economic programs and budgets of member states. This has not always been the case, but whereas socio-economic stability is often synonymous with internal security, the intrusions - sometimes insolent - of the IMF have become legion these days.
In Africa, the IMF represents a kind of puppeteer for several economies. It must be said that the experience of African states with bilateral debts has not been the most successful. The former colonial powers being themselves in debt and hesitant to invest in their former colonies without a rapid return on investment. The Chinese loans, on the other hand, have had serious consequences, despite the terms that are a priori advantageous. We have seen it in Zambia, Ethiopia and Angola in particular.
The IMF therefore intervenes in countries that are unable to reach a consensus with their creditors and fear possible sanctions. Because, despite everything, a State cannot file for bankruptcy. Restructuring the debt seems like a miracle solution, because private creditors – bondholders or commercial banks – are not known for their patience, and the consequences of debts owed to States are even more serious.
carrot and stick
And precisely, the IMF has found fertile ground in Africa for its policy of “infinite debts”. The debt taken over by the World Bank in the 1990s is now a hundred times its value. While the political opposition in some African countries often criticizes the latest debt choice, it overlooks the fact that the last debt restructuring sometimes goes back decades.
Why did some African states, such as Ghana, Uganda, Côte d'Ivoire, Congo or Tunisia, get bogged down in multilateral debts that they continue to pay today? The answer is simple: in the 1970s and 1980s, the “intrinsic development mechanisms of debt relief” were introduced by public creditor groups, especially in Latin America. What used to be called sovereign “debt cancellation” was often not actually so. But Africa only discovered it too late.
Indeed, the offer was tempting. In short, instead of coming to terms with the risk of exclusion from the United Nations Conference on Trade and Development (UNCTAD) or of being declared persona non grata within the global economic fabric, it was enough to accept the IMF conditions.
The IMF, the debt collection agency for the Paris Club
The only alternative: expose yourself to the wrath of public creditors. A striking example of this observation: the Paris Club. This NGO, representing the interests of 22 creditor countries of other States, had more or less rebelled against the humanitarian aspect of the IMF's action on three occasions. The terms of Toronto (1988), London (1991) and Naples (1994) allowed partial cancellation of a sum of the debt if the debtor State paid the rest of the amount in three years.
What threaten the raison d'être of the IMF. The latter has therefore proceeded, since 1996, to find more effective solutions for the Paris Club and the other groups of public creditors. On this date, the Heavily Indebted Poor Countries (HIPC) initiative was launched by the IMF. Of the 39 states in the program, 32 were African, a number that has since grown steadily. It was also the first time that the restructuring of public debt or its relief was conditional on uniform reforms.
Politically, the late 1990s and the 2000s were good times for the IMF. A majority of African states were then going from economic boom to crisis. Globalization has laid bare the human development gaps in Africa. However, the IMF reforms left very little room for development. One of the most common reforms being the reduction of public expenditure.
IMF reforms, a victory for imperialism
Precisely, the reforms imposed by the IMF as a condition for restructuring the debts of States or the granting of new loans by the fund's partners have often been at the center of controversy. For good reason: massive layoffs of civil servants, increase in the retirement age, privatization of public companies, drastic increase in the interests of creditors... So many examples of the concessions that States had to make to find themselves in the shadows of a spiral of additional debt.
For the journalist Mohamed Gueye, the main thing for the IMF is to “combat the economic and food crisis without shaking the financial architecture of the countries concerned, nor above all reducing their ability to pay their debts”.
This is a far cry from the raison d'être of the IMF, such as the promise to “contribute to a high level of employment, economic stability and reduce poverty”.
Not to mention the hegemony of the United States, which the statutes of the IMF did not allow, however, at the creation of the organization. A reform in 2010 led to the doubling of voting rights quotas for the ten countries that adopted it. As a result, the United States exceeded the authorized quota, with 15% of the voting rights. However, within the IMF, the election of the Board of Directors, the choice of quotas and other decisions require 85% of the votes. A reform that took place during the mandate of Christine Lagarde. How to explain such a snub? The internal reform of the IMF gave 6% of the voting quotas to the countries which had participated, before 2008, in the HIPC initiative.
Will Africa bear the brunt of the new crisis?
It should be recalled that among the 39 African countries which have adhered to the HIPC initiative since 1996, 37 have passed the “completion point”. In other words, these countries have paid the installments of public debt as agreed, continued to apply the reforms decided with the IMF, among other gestures of goodwill.
But goodwill is not reciprocal. Today, 22 African countries are considered over-indebted or countries at risk of over-indebtedness…by the IMF!
The organization therefore does not intend to redirect funds from public creditors and the World Bank at its disposal for the benefit of these countries. In any case, not unless the said African states make additional concessions.
Sacrifices decided in an opaque way, often, and where the multilaterality of the debt managed by the IMF is mixed with bilateral debts. A corruption that operates in full view of all. And today, the means of pressure are not lacking. A blackmail already observed in Sri Lanka, considered by the economist Larry Elliott to be “the first domino to fall in the global debt crisis”. “The list of vulnerable countries is long and varied. The IMF has started talks with Egypt, Tunisia and Pakistan. (…) But African countries are closely watched. Especially Ghana, Kenya, South Africa and Ethiopia,” warns Elliott.