Ghana’s economy turned as hot as the local pepper soup earlier in the decade, with soaring global demand for the nation’s riches — gold, cocoa and bauxite — sparking a rush to modernise Ghana’s decaying roads, rails and power grid.
But when the government hatched a plan last year to rebuild the national infrastructure by selling $750 million worth of bonds, its minders at the International Monetary Fund balked.
As in so many other developing countries, the IMF had for years served as banker, bean counter and financial consultant to Ghana, its authority stemming in part from the $1.3 billion over 20 years it lent the once financially troubled country.
In dire need of that cash, Ghanian officials had cooperated with the fund’s requests, agreeing to slash gasoline subsidies, trim spending and open markets to cheaper foreign imports.
But this time, there was a big difference. Ghana had joined a long list of developing countries in Africa and beyond enjoying record periods of growth, with the robust economy leaving it no longer in need of more IMF cash.
The government rejected the fund’s calls for a far smaller bond sale. Officials say the IMF grudgingly agreed, dispatching a liaison to help it carry out the complicated offering.
That decision underscores the changing role of the IMF as developing economies have roared to life in recent years, with the fund increasingly becoming more adviser than lender.In 2003, fund lending reached an all time high of $116.9 billion.
But as developing nations have capitalised on surging commodity prices and shared in the economic coming of age in China and India, more countries are forgoing IMF loans and the strict demands that come with them.
The IMF, founded in 1944 to foster the reconstruction of the global economy in the wake of World War II, is entering its largest period of upheaval since the fall of the Berlin Wall.
Over the next year, the Washington institution will slash its 2,900-person workforce by 13 per cent through a combination of buyouts and some layoffs, reflecting a loan portfolio shrinking so fast that the IMF is seeking to sell off $6 billion in gold reserves to create a new long-term source of income.
Yet the IMF was never intended to serve as a global bank for developing nations. That role is reserved more for the World Bank, the fund’s sister organisation, which focuses on longer-term development projects.
Instead, the IMF has been an overseer of structural adjustment and a temporary lender to nations in financial crises, of which there have been fewer in recent years.
In Africa — the region still most heavily dependent on the IMF — a picture is emerging in some of the stronger economies of what the future of the fund may look like.
As robust economies in Uganda, Tanzania and Nigeria have moved away from reliance on IMF cash, they have adopted new “policy support instruments” — or official advisory programmes in which the fund’s staff provide intensive guidance on economic policy.
Countries such as Kenya and Ghana have embraced a less formal structure, welcoming the IMF in the role as chief consultant on major fiscal and financial decisions.
“We must speed up the progress made in focusing more on helping low-income countries secure and maintain macroeconomic stability and less on structural issues outside of the fund’s core mandate,” Dominique Strauss-Kahn, who took over as IMF president last year, said at the fund’s annual meeting last month.
Top fund officials describe a “new IMF” that will be less focused on forcing nations to adopt tough cost-cutting measures and more on ensuring that they don’t make mistakes that could generate the kind of financial crises that washed over Asia in the late 1990s and South America in the early 2000s.
-LA times washington post IMF officials say it speaks at least in part to the fund’s success at teaching countries like Ghana good fiscal and economic policies, as well as the wisdom of an internationally backed effort earlier this decade to forgive massive amounts of African debt.
But critics say it also heralds the fund’s diminishing importance in a world where developing nations have more lending options than ever before. That is particularly true as the Chinese and the Indians lavish Africa and other regions with billions of dollars in low- or no-interest loans, often in exchange for access to oil and minerals but carrying no demands for fiscal restraint or free-market reforms.
Source: BD Africa
http://www.bdafrica.com/index.php?option=com_content&task=view&id=7893&Itemid=5848
