[stop-imf] IMF admits it is failing Africa

[Robert Weissman]

Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/3211328.stm

Published: 2003/10/21 16:53:44 GMT

IMF admits it is failing Africa
By Martin Plaut
BBC Africa analyst
The International Monetary Fund (IMF) has admitted that one of its key
African initiatives is in
trouble.

In a working paper published in Washington, two of the IMF's researchers
show that its programme to
relieve some of Africa's poorest countries of their debt burden may not
produce a sustainable economic
situation.

The IMF's initiative for Heavily Indebted Poor Countries was launched in
1996.

Its aim was simple: to cut the mountain of debts that countries had run
up, reducing them to more
manageable levels.

At the same time, the programme encouraged states to increase their
spending on the poor - on badly
needed policies aimed at building schools and paying teachers.

Spending shortfalls

This study looks at the performance of 12 African countries - all of
which were heavily indebted before the
programme got under way.

These include Mozambique, Tanzania, Ghana and Cameroon - countries
chosen to represent a variety of
economic conditions.

Unless HIPCs improve their primary fiscal positions or grant financing is
sustained at current, or possibly higher, levels, debt sustainability in
HIPCs may
prove elusive IMF report


The problem highlighted by the study is that half the countries sampled
are estimated to be unable to raise enough revenue to pay for the
spending programmes the IMF is calling for.

"As countries made progress in macroeconomic stabilisation they are now
'allowed' to increase their expenditure to address poverty reduction
needs," says the report by Annalisa Fedelino and Alina Kudina.

It gives Tanzania as an example. The country is projected to increase
its expenditure level by more than 4% of GDP, to above 22% of Gross
Domestic Product (GDP), in 2002/3 relative to the previous fiscal year.

"However, based on our framework, this may result in the country's
swinging back into unsustainable debt levels," the report continues.

"Unless HIPCs improve their primary fiscal positions or grant financing
is sustained at current, or possibly higher, levels, debt sustainability
in HIPCs may prove elusive in the long term," it says.

The authors warn that the countries concerned are likely to move back
into unsustainable levels of debt.

Only raising taxes or getting more foreign aid will allow Africa's
poorest nations to escape this fate.