[stop-imf] Excellent Time story on Tanzania and the IMF

[Robert Weissman]

Time
http://www.time.com/time/magazine/articles/0,3266,43183,00.html
 WORLD APRIL 24, 2000 VOL. 155 NO. 16 

 The IMF: Dr. Death? 
A case study of how the global banker's shock therapy helps economies but
hammers the poor 
BY ERIC POOLEY

 The anti-globalization movement serves up plenty of hot rhetoric but also
some disturbing truths. Street protesters have it exactly right, for
example, when they argue that the economic policies imposed on developing
nations by the International Monetary Fund and World Bank have hammered
the poor. Using loans and the threat of default as levers, the IMF has
pushed more than 90 countries to accept its brand of free-market shock
therapy: lowering trade barriers, raising interest rates, devaluating
currencies, privatizing state-owned industries, eliminating subsidies and
cutting health, education and welfare spending. These
"structural-adjustment programs"--a chilly bureaucratic euphemism if ever
there was one--attract foreign investment and stimulate the business
climate (and the local elites). But the programs also drive up the cost of
living, rip holes in already tattered safety nets and help kill small
farms and businesses. After Haiti lifted its trade barriers under IMF
pressure in 1986, for instance, an imported mountain of cheap American
rice--subsidized by the U.S. government--buried the island's rice
industry. 

 The IMF and World Bank admit the problem while insisting that their
policies will boost living standards over the long term. But people in the
Global South have lost patience with such talk. In Bolivia this month,
rioting broke out because the government and a multinational consortium
planned to raise fees for drinking water. Eight people were killed. It was
a reminder that the globalization protests in Washington aren't simply the
product of a Web-connected U.S. counterculture but of an anger that's
building around the world--the defining North-South issue of our time.

 Consider a country that the IMF and World Bank regard as a success:
Tanzania, the vast East African nation that is among the poorest places in
the world. Best known to Americans for Mount Kilimanjaro and the Serengeti
Plain, it has been stable and relatively peaceful since it gained
independence in 1961. For two decades, it steered a course of self-reliant
socialism--a one-party government controlled the economy, taxed mightily
and spent lavishly; its literacy rate was among the highest in Africa. But
by the mid-1980s, Tanzania's economy was flat-lining, with hyperinflation,
huge budget and trade deficits, and massive dependence on foreign aid.
Today, after 15 years of IMF-imposed structural adjustment, administered
most effectively since 1995 under President Benjamin Mkapa, Tanzania has
"made great progress in getting its macroeconomic situation in order,"
says James Adams, the World Bank director for the country. Inflation has
fallen below 7%, and the GDP is growing 4% a year; European sedans glide
through the streets of the capital, Dar es Salaam, and imported goods fill
the shops. Mining and cash-crop exports are up. R.J. Reynolds refurbished
an old cigarette factory. The country established a stock exchange.
"There's no question that opening up trade has transformed Tanzania,"
Adams says. 

 It would all be rosy were it not for the 15 million to 18 million
people--more than half the population--living in dire poverty, with 12.5
million of them unable to afford the most basic needs. These men and
women, almost all subsistence or small-plot cash-crop farmers, have been
structurally adjusted half to death. Though Adams points to progress--51%
of Tanzanians now survive on $1 a day or less, down from 65% in the
mid-1980s--his statistic makes Tanzanian analysts laugh bitterly, because
it misses the fact that everything in a farmer's life costs more today.
Currency devaluation and the elimination of agricultural subsidies doubled
and quadrupled fertilizer prices, according to a study by the Evangelical
Lutheran Church. Farmers couldn't borrow, because short-term interest
rates in rural areas hit 100%. Yields fell, but thanks to global
oversupply and greedy middlemen, farmers were often paid less for what
they could grow. Famine remains a persistent threat for 40% of the
country.

 With Tanzania's debt from IMF, World Bank and other loans now at $6.4
billion, the government has been spending 40% of its annual revenue on
interest payments--more than it spends on health and education combined.
Even the poorest families are subjected to "cost sharing"--paying fees for
basic health care and even elementary school. In response, 70% of the
people consult faith healers (this in a country with an HIV epidemic), and
school enrollment has fallen from 93% in 1993 to 66% today. "The data are
very clear," says I.F. Shao, director of the Institute of Development
Studies at the University of Dar es Salaam. "A small number of people are
doing very well indeed, but the vast majority are suffering more than
ever. There are wonderful things in the shops now, but who can buy them?"
Adams agrees that "we need to get the income gains into the rural areas,"
but defends the reforms. "The transition could have been made more gently,
but it had to happen. The old system was unsustainable. But now, finally,
we're at the starting gate--Tanzania is ready to build on its progress."
The World Bank and IMF announced a $2 billion debt-forgiveness package for
Tanzania last week, but Mkapa moved quickly to make sure his people didn't
get their hopes up. He announced that the benefits of debt relief won't be
felt until late 2001 and added, "We have to continue tightening the belt."
END