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Tuesday, 7 May, 2002, 16:47 GMT 17:47 UK
Can the IMF save Africa?
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by Andrew Walker
BBC Economics correspondent

This is the last in a series of pieces from Africa, where Andrew Walker has been travelling with IMF head Horst Koehler.

Mr Koehler went to Africa to listen, to find out how IMF and World Bank programmes to tackle poverty are working out on the ground and how they could do things differently.

It is part of a new approach that the IMF and the Bank announced in late 1999 which emphasises poverty reduction and consultation.

Mr Koehler seems to have liked most of what he heard.

He came away believing that the countries he visited are by and large on the right road for sustained economic growth and - the point of the whole exercise - reducing poverty.

Finding their own way

He also talked about countries finding their own route to a better economic future. There is no 'one size fits all' policy, he said.

But, even if there is room to talk about the details, the broad outlines that the IMF expects countries seeking loans to follow are a standard package.

Reducing poverty requires economic growth, good political institutions - governance is the jargon word - and macroeconomic stability, in other words moderate inflation.

The driving force of economic growth in this vision is private sector business, market economic forces and strong government finances.

This catalogue of pre-conditions doesn't come easily in many African countries.


Take good governance. It is often seen as a euphemism for tackling corruption.

Mr Koehler's calls for Africa to root out corruption were received politely.

But he had an enthusiastic response when he added that it takes two to tango - that bribery only happens if someone, often a western business, is prepared to offer a bribe.

Some of Africa's governance problems are technical.

Few countries have the wealth of well trained people to run things the way developed economies like to think they do.

During the course of the tour, Mr Koehler announced plans to open two centres for technical assistance, one in Tanzanian capital Dar es Salaam, and one in Abidjan in Ivory Coast.

The IMF plans to offer more. The idea behind these is a fairly cheap intervention to help countries gain the technical ability to manage their economies.

Private sector role

And what about the central role of the private sector?

That too doesn't come easily to the many African countries with a history of extensive state intervention.

Mr Koehler thinks that the private sector message is getting out across the continent. But he also has a wary eye out for politicians that are reluctant to let go.

Inflation fighting

Africa also has a pretty erratic record for keeping the lid on inflation.

This is an area where the IMF has been accused of being obsessive.

Mr Koehler, like his predecessor Michel Camdessus, is adamant - the main victims of inflation are the poor.

The problem for Africa is how to finance the social spending - like education health and clean water - that make a big impact on the poor.

It is very hard to raise taxes. Local financial markets are not very effective means for government borrowing.

So the temptation to finance spending by printing money and causing inflation is often hard to resist.

But if they want IMF financial help, they have to.

Charging the poor

Both the IMF and the World Bank seem to be increasingly keen to distance themselves from one especially hated policy - user fees for basic health and education services.

Critics of the institutions see these as disastrous policies imposed by the IMF and the Bank that prevent the poor having access to essential services.

Mr Koehler said in Tanzania that they were not an IMF policy there.

And earlier in Washington, the World Bank boss James Wolfensohn said he was against user fees.

What does it all add up to?

Not much so far in terms of reducing poverty.

The figures don't show much impact.

But Mr Koehler sees this as a long term task. He believes that policy changes in the poor countries are laying the foundations for real progress.

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