By Kebour Ghenna
December 24, 2019
The IMF, has been instrumental in helping destroying the economy of a myriad of countries, notably, and to start with, the new Russia after the fall of the Soviet Union, Greece, Ukraine and lately Argentina, to mention just a few. Madame Christine Lagarde, as chief of the IMF had a heavy hand in the annihilation of at least the last three mentioned.
Peter Koening [ Economist and geopolitical analyst. He worked for over 30 years with the World Bank and the World Health Organization around the world]
As I see it there are two schools of thought on the debt issue. The first feeding us a distorted, fairytale version of reality that argues borrowed money will grow the economy. It doesn’t matter if the real economy (production/consumption) does poorly they say, borrowed money will take us to La La Land. For this group more loans means rosy future. I will put our Prime Minister in this category.
The other school of thought is rather guarded, even gloomy, from our point of view. It argues that debt is what defines relationships between people. It’s what makes one master, the other servant. It’s what makes one owner and the other a slave. For this group; debt like nature, will always catch up with us at some point. Argentina is a good example; read how the IMF and private banks brought widespread suffering and a massive economic decline to the country.
The ordinary person is of course confused. To begin with he (or she) doesn’t even know that he will ultimately have to pay these debts. For these fellows life is tough… they know one has to be a rascal to spend more than he or she earns. They pray to God to get them out of debt…knowing well their prayers are not always answered.
From 2000 to last week, Ethiopia’s debt has multiplied nearly four times. It was less than 7 billion in 1999. Now, it’s over $20 billion going up to 30 billion. No nation… nowhere… no time… no how… has ever been able to spend more than it takes in forever. Indeed, debt is not capital, it is the opposite, it’s the anti-capital. It is borrowing tomorrow’s income today and at interest (although it’s not clear whether the IMF interest rate extended to Ethiopia is close to zero, or even negative). It is money that hasn’t even been earned… let alone saved. Every dollar of debt cancels out a dollar of savings. The more debt you have, the less real net savings you have to drive the economy going forward.
Yes, leaders don’t like to see their fashionable truths attacked; and attacking them puts us at odds with all those whose reputations and wealth depend on them. But we do this not to devalue the work our leaders do, but rather to bring new perspectives to our dear readers, who, I am sure, don’t expect us to be right all the time but to be honest… about what we see and hear and think and share.
Regarding the IMF loan to Ethiopia, for example, we don’t see how an IMF loan of $3 billion would help Ethiopia deal with its fundamental problems or its short-term crisis. The many reasons put forward by advocates for providing a loan to Ethiopia, including enabling the country to meet its immediate obligations to creditors and to bolster the reserves of the central bank do not make sense. True, the IMF loan would temporarily increase the amount that the country could pay to its private creditors, but it would finance only a very small part of those obligations and would do nothing to reduce the debt write down that may eventually be necessary. As for bolstering reserves, the government has accepted the idea of a floating exchange rate – It’s still not clear how the central bank is going to let that happen, because in competitive floating currencies, you have to have a very strong export revenue generation to have a stable currency, simply because you are prone to imports and the fluctuation of commodities and currencies.
Regarding the wide ranging conditions imposed by the IMF on the government, it seems that many of the policies that the IMF now demands would be sensible things that we Ethiopians ourselves know should be done and that we would do even without IMF conditionality. Making these changes appear to be forced by the IMF only weakens the public’s confidence in the government and increases the risk of instability. Moreover, policies that appear to be accepted under duress would also be easier for future governments to undo.
In brief the IMF isn’t trying to solve Ethiopia’s problems at all, from what we know the package has the same old neoliberal policies that have increased inequality, deepened poverty, and stripped and privatized assets with profits held abroad. Here again, the same discredited structural adjustment playbook is being applied.
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