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(DAILY MIRROR ZIMBABWE, ANTONIA JUHASZ) The Tragic Tale of the IMF in Zimbabwe

The Tragic Tale of the IMF in Zimbabwe.
by Antonia Juhasz
The Daily Mirror of Zimbabwe
March 7th, 2004

The protestors "will say the IMF is arrogant. They’ll say the IMF doesn’t really listen to the developing countries it is supposed to help. They’ll say the IMF is secretive and insulated from democratic accountability. They’ll say the IMF’s economic ‘remedies’ often make things worse—turning slowdowns into recessions and recessions into depressions. And they’ll have a point." -- Joseph Stiglitz, former Chief Economist and Vice President of the World Bank.

Protests against the policies of the IMF have occurred in every corner of the world for decades. Zimbabwe has been host to some of the most powerful and persuasive due to the appalling record of the IMF in that country. The IMF took a devastated economy and made it far worse – with the vast majority of the burden falling on the poorest members of society.

An IMF-sponsored study of its policies in Zimbabwe concluded that it "radically underestimated the social consequences," of its policies and that the "social hardship was avoidably severe because of poor program design." In other words, the IMF is to blame for the deadly impacts of its policies in Zimbabwe.

Sadly, this outcome is not unique. Rather, it represents the constant thread through IMF giving: conditions placed on receipt of loans are designed in virtual apathy to anything other than strict neoliberal measures of financial growth. Cookie-cutter approaches are applied to revamp economies such that a small sector of society (often not even residing within the recipient country) reap enormous gain, while the majority is expected to wait for its benefits to "trickle down" to them. Rarely, if ever, do these trickle down effects occur, leaving the majority – particularly the most vulnerable in society, in markedly worse conditions than before the Fund arrived.

Several studies of IMF and World Bank structural adjustment programs have actually found that the longer a country succumbs to these programs, the more indebted the country is likely to become. A 1999 study by Development GAP found that a full two-thirds of the 71 Southern Countries studied between 1980-1995, saw their debt burdens increase during the adjustment period. The longer they implemented the programs, the worse their debt burdens became.

Sadly, Zimbabwe is a clear case in point.

Zimbabwe received an IMF Enhanced Structural Adjustment Facility (ESAF) loan in 1990. The ESAF is a program designed to extend three-year, low-interest loans to low-income countries requiring more "extensive adjustment in order to achieve growth and a sustainable balance-of-payments position." Thus, it differs from other IMF operations in its scope, with significantly more extensive conditions applied to recipient governments. What has made the ESAF particularly controversial is its near total lack of success. According to the IMF’s own studies, a full 75 percent of its ESAF programs have "fallen off-track." Few countries ever graduate from the program, rather they become more mired in debt and poverty.

IMF Report on Zimbabwe

In 1998, under immense public pressure, the IMF sponsored a comprehensive evaluation of the ESAF by outside reviewers. Called the External Evaluation of the Enhanced Structural Adjustment Facility (ESAF): Report by a group of Independent Experts, the report provides a scathing analysis of the Fund’s activities in Zimbabwe.

The reviewers found that the ESAF was severely flawed in that it was overly ambitions, incorrectly sequenced, and there was a complete lack of concern for the social consequences of the program. The three flaws join together to create one monumental disaster.

In essence, Zimbabwe was forced to implement every radical economic policy in the Fund’s arsenal immediately, without any concern for the impacts of those policies on the populace. In order to radically reduce government spending, the government fired tens of thousands of workers, gutted the pay of those who remained and drastically reduced spending on social programs. At the same time, taxes were reduced (the idea being to encourage both increased spending and businesses to locate to Zimbabwe), and the country was opened to foreign competition - hitting the manufacturing sector particularly hard. Because the Fund fundamentally underestimated the impact of these changes (in the words of the reviewers), the programs designed to address the social costs were completely inadequate.

The impacts were devastating.

Both employment and real wages declined sharply. During 1991-1996, manufacturing employment fell by 9 percent and wages dropped by 26 percent. Public sector employment fell by 23 percent, with wages dropping by 40 percent. While pocketbooks shrank, food prices soared, increasing by 36 percent. Private consumption levels declined by about one-fourth with urban households being particularly hard-hit. Worse still, the economy did not respond as the Fund had hoped and the government deficit increased. This put the country into a "debt trap" where it was losing money while simultaneously having to pay interest on its loans owed to the Fund and the World Bank. This created a losing spiral of increasing indebtedness and poverty.

Health Care Crippled

The impact on the health care sector was particularly severe, this after a decade of improvements prior to the entry of the IMF. As the report found, "There is no doubt that the previous trends of improving health outcomes were reversed during the period of the reform program."

During the 1980’s, the government put significant attention and resources into improving health services with remarkable success. For example, the infant mortality rate declined from 100 to 50 between 1980 and 1988 and life expectancy increased from 56 to 64 years. However, the entry of the IMF reversed this trend by imposing enormous cuts in public health spending which dramatically reduced access to services for the poor.

Spending per person on health care fell by a third from 1990 to 1996 with cuts in services outpacing cuts in wages to health care workers. Thus, between 1988 and 1994, wasting in children quadrupled and maternal mortality rates increased. After many years of decline, the number of tuberculosis cases began to rise in 1986 and by 1995 had quadrupled. Friends of the Earth reports that prenatal care, which had previously been free, now required a fee, while primary care fees increased by over 500 percent. Low-income exemptions were all but eliminated, forcing the most vulnerable population to either pay for services they could not afford, or go without health care services altogether. The result was an easily anticipated decline in prenatal clinic attendance and an increase in the number of babies born before arrival at the hospital.

Making the cuts in health care significantly more disturbing is the fact that Zimbabwe had, and continues to have, one of the worst AIDS problems in the world, leading the IMF reviewers to conclude, "what is, however, evident is that during a period in which the demand for health care was rising enormously and predictably [due to the HIV crisis], the resources devoted to public health care were dramatically reduced."

These outcomes are made all the more tragic by the constant reiteration of the reviewers that the impacts were foreseeable and avoidable. The IMF imposed conditions that were too harsh, too quickly and without regard to the impacts on the society.

It is clear that Zimbabwe was in trouble in 1990. It is also clear that the government was willing to work with the financial institutions and the global community to address its problems. Financial capital was needed, as was reform. However, what was offered by the IMF was geared towards opening Zimbabwe to foreign enrichment rather than bettering the lives of its populace. It even failed on this account.

The Way Forward

There is now a global movement demanding fundamental change from the IMF, the World Bank, and the other global financial institutions. Solutions, while not simple, are available. First, Zimbabwe’s debts must be canceled, as with the conditions currently placed on it by the IMF and World Bank. Second, there must be an increased emphasis on targeted and increased aid programs that go directly towards service provision and training rather than financial sector growth – particular emphasis is needed on increased funds directed at the HIV and AIDS crisis. Other changes in international rules and internal policy are also necessary, but these are a critical first step. Thus freed from the restraints of the global financial institutions and provided with increased global capital, much of the solution will, of course, then come from within Zimbabwe itself.

* Based in San Francisco, California, the IFG is an alliance of leading global activists and scholars formed in 1994 to stimulate new thinking, joint activity, and public education in opposition to the current model of economic globalization and to offer alternatives. It has been called "one of the most serious and respected groups of experts dedicated to analyzing and generating alternative proposals to the economic model promoted by international financial agencies" by La Jornada of Mexico. Antonia Juhasz, IFG Project Director, is co-author of the IFG publication, "Does Globalization Help the Poor?" and has written articles on all aspects of corporate globalization in publications including the New York Times, the Cambridge University Review of International Affairs, and the Johannesburg Star. She has been a Legislative Assistant to two United States Members of Congress and holds Masters Degree in Public Policy from Georgetown University in Washington, DC.

© Antonia Juhasz

Labels: IMF, NEOLIBERALISM, SAP, ZIMBABWE

posted by MrK @ 1:08 AM