Friday, February 22, 2013
Dont let IMF dictate policy, we have ourselves to blame for not leading
IMF’s Christine Lagarde was in the country last week, in what I call a moral support mission. Her trip has also taken her to some African countries. In all her travels, she has commended countries that have taken liberal economic reforms such devaluation and removal of subsidies. In the country, the media has been awash with various commentaries, mostly demonising the IMF for the current mess. Similar sentiments have been echoed in the social media, particularly twitter and facebook. Malawians are quite engaged it appears. But we cannot always blame the IMF for the mess we have found ourselves in. While we are a member of the IMF, we must also remember, that this institution is more concerned with its “bigger” members, the US and Europe, than poverty stricken countries like Malawi, undiplomatic as it appears. That is why its CEO is always European, and its sister agency, the World Bank is always headed by an American. We were not there when they created these institutions at Bretton Woods in New Hampshire, half a century ago. The issue at hand however, is whenever we have an economic crisis, IMF is not always to blame. It is easy to point a finger at the IMF, but in the process we ignore fundamental issues that have led us into an economic abyss. We have to grow and man up and accept responsibility and hold our leaders to account for their actions. In 1992, most of our developing partners withdrew financial support citing human rights violations. The kwacha could not hold for very long, and a huge devaluation followed in 1994. Similarly, in August 1998, another devaluation of around 68% happened. Factors were a mix but human rights violations and misuse of donor funds motivated withdraw of financial support. Remember the story of the Danish and their Danida? Then the rants by President Muluzi at the opening of the Japanese funded Mangochi bridge. The recent devaluation has hallmarks of bad governance effects under the DPP regime. July 20killings, arrests of journalists, procurement of a presidential jet without parliament approval, oppressive laws and the general intolerance of dissent are classic examples. When development partners withdraw such support, devaluation is always a matter of time, no matter how long you fix a currency. Bad governance is not acceptable and in our case, it has historically led to massive devaluations of the currency, given our reliance on foreign aid. The weak export base complicates the problem. We learnt that you can chase tobacco buyers or suspend tobacco sales, but cannot influence the price. So how does IMF come in? I don’t think the IMF has ever had a hand in advising the government of Malawi to enact laws to limit the rights of its citizens. Neither has it ever recommended suppression of free speech. Most of our foreign resources come from bilateral donors who have their own ambassadors in Lilongwe and make their own assessments on matters of good governance, cardinal to the aid they give. We should remind ourselves that all donor inflows are basically foreign tax payers’ money. Specifically, not all foreign tax payers are filthy rich, but folks that simply work hard and value accountability in which public resources are used. It does not require IMF to tell us MPs do not need an allowance for simply sitting in parliament, yet they have a salary and a subsistence allowance while away from their homes. Such resources can be channelled to developing new energy sources or equipping empty pharmacies in public health facilities. What does this lead us to? While the IMF is often an easy target, we usually forget that it never participates in elections. Neither does it involve itself in electing leaders that run this country. Malawians elect leaders to govern, and are ideally expected to lead this country to some level of prosperity. Instead of turning our anger on the IMF, I reckon it is important that we focus our attention on elected political leaders or those that aspire for public office. Malawi’s rank on ease of doing business index is 129 out of 144 countries. If we are to have a readily available supply of forex, instead of blaming the IMF, we need to work our way up to become a major destination for doing business. The onus is on our political leadership to not only think, but act strategically beyond their political life span. We cannot point our fingers at the IMF for hourly power cuts that scare away potential investors capable of producing for the export market. Neither can we point a finger at the IMF for shady mining deals that are costing us much needed foreign exchange. Similarly we cannot point a finger at the IMF for a financial system that is not easy for tourists to easily transact and eventually keeps them away. It is not the mandate of the IMF to ensure that all Malawian kids have a good education irrespective of the financial status of their parents. It will not require the IMF to reform our public service to effectively deliver and reduce costs of doing business. Consider some of the most incompetent public institutions, the Road Traffic Department. It takes over 5 months to get a registration to run a car hire business unless you corrupt a few guys. Similarly, it will take many months to renew a driver’s license unless you pay a bribe. Consider the case of another world class incompetent institution, ESCOM. It takes over a year, unless you pay a bribe, to have a property connected to electricity even when the electric pole is a few meters away. The level of corruption remains appalling. Such are simple examples but if you factor in productivity losses by businesses, it makes Malawi a costly destination to do business, unattractive to be precise. Consequently, we are losing out on all potential foreign capital inflows needed to drive exports from non-traditional sources. And blame IMF? IMF is not responsible for the mess we are in, but I still don’t believe their textbook experiments. While it is fashionable to make them an easy target, it is important that leadership of the country is responsible for governing . Like we discussed a week ago, our issues revolve around strong political will to take brave decisions. IMF should follow our agenda, we are a sovereign member state.