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Iddy Mwanyoka     Email : mwanyoka@nifahamishe.com     
HOW IMF & WORLD BANK FAILED IN AFRICA
             
HOW IMF & WORLD BANK FAILED IN AFRICA

Call them 400 pounds Gorilla in the room, and they sure know how to suck the air. For many years IMF and World Bank held custody African nations. These two agents control almost every action that we’re trying to take. They force us to maintain old economical development strategy which based on “export led-growth” or “export led-development”. While most of developed nations moved away from such awkward strategy.

In the man kind history no nation has ever taken the step from being poor to being wealthy by exporting raw material in absence of domestic manufacture sector. Although history suggests no body get rich by exporting low value agricultural commodities, the World Bank and IMF seems to be encouraging or forcing Africa nations to pursue such a strategy, with disastrous results.

Take the international coffee trade as a case in point. In coffee producing countries, IMF and World Bank has been requiring government to liberalize. These have involved measures such as eradicating price model, disbanding trading board and actively encourage increase in production and exports. For instance in 1993 World Bank advised Ugandan government to increase coffee production to five million bags; however World Bank didn’t focus on the other side of the coin which is oversupply of Robusta coffee in world market which led to price crash.

Ironically, the kind of policies that now help majority of African nations to qualify for debt relief under Heavily Indebted Poor Countries (HIPC) has contributed to trap these nations in the worse economical standard ever. IMF and World Bank expertise ignore simple Economics 101 knowledge which says an increase in supply, without an increase in demand, will lower price. Those expertises only care about increasing in production and exports and reducing state intervention across the global.

In the 1990s IMF and World Bank took a new approached which focused on privatization. They forced poor nation to step aside when it come to industrial management. Yet the United Nation Conference and Development (UNCTAD) has found that the rapid and extensive trade liberalization undertaken by developing countries during the 1990 failed to benefit the poor. According to UNCTAD trade liberalization has cost sub-Sahara nation more than $272Billion for the past 20 years.

In 2003 Ghanaian Parliament passed the law to increase the import duty on poultry products to protect Ghanaian farmers who were fight uphill battle with subsided European poultry producer. However, after a phone call from IMF, the legislated increased import duty was removed by the Ghanaian government after just few weeks.

Leaders of the West have pressurized IMF and World Bank to recommend agricultural liberalization to the third world nations, while they’re maintaining massive subsidies for their own farmers. The ‘one size fits all’ liberalization policies have failed to lead economic growth in developing nations.

Trade liberalization has also created problems for sustainable government income. Research has show that cutting import tariffs has reduced tax revenue resulting in fiscal squeeze, exacerbating the debt problem and causing cutback in infrastructure investment. Although the theory is that governments can replace tariffs with other taxes, this is easy said than done in a real world.

Majority of the IMF and World Bank economist graduated from North America and European universities, and they care about how the policies will benefit their nations. They’re pushing free trade and less regulations without even conduct any studies or use common sense. We need golden rule when it comes to trading, if a multi million dollar farmer in Idaho received subsidy from US government, then why can’t we even subsidies fertilization for our little guy?


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