By Chibamba Kanyama
One African country, Ghana, provides us with incredible lessons about how not to manage an International Monetary Fund (IMF) programme. In 2015, Ghana accessed an IMF loan worth US$918 million to help it stabilize the economy. Unfortunately, it seemed the leader of the country had its own ‘most urgent’ priorities outside what was agreed with the lender. It is a case of getting a loan from a bank to finance your chicken business but children are out of school for lack of fees; you have a long list of relatives requiring urgent help in India and you owe the local tavern in unpaid bills stretching two years. The tavern owner has heard about the loan and wants a settlement at gunpoint.
In the case of Ghana, knowing that the IMF was watching, it decided to secretly print money (estimated to be equivalent to US $20 million) to finance pressing needs, most of them related to elections. Political pressure can easily make any country under an IMF programme go off the terms of the loan agreement.
Here is what government officials, political leaders and citizens should know from the moment you sign for an IMF loan: you are simply naked! There is a full requirement you disclose all government initiatives. You cannot spend money on any project outside what is agreed (the budget) and the IMF must know and possibly approve if there is any slight change to the plan. It is all about transparent dealings, openness to scrutiny, accountability and integrity. This is what the previous regime in Zambia feared. Full stop!
IMF HAS INCREDIBLE EYES!
Ghana thought the printing of money (which is a form of borrowing) would not be known by the IMF. But even in pregnancy, there are signals something happened before. The rate of inflation rose amidst an IMF programme when the opposite should have happened because that was the intention of the loan: stabilize the economy.
Civil society in Ghana, which had been thoroughly oriented to the IMF programme and its core terms of agreement, blew the whistle. I was at the IMF at that moment when the information leaked, that Ghana had borrowed money without the knowledge of the IMF, a key line in the loan agreement requiring disclosure of any intention to borrow during the period of the programme. The IMF reaction was adverse. It suspended the programme within a year of signing it (though restored after the vice President visited Washington DC a year later to plead for resumption).
The worst thing you do not want to have as a country under an IMF programme is a suspension. It signals to the entire world that you have messed up. Investors panic and all those other cooperating partners freeze support. Your new position can potentially be worse than your situation before the IMF programme.
IMF PROGRAMME CAN FAIL
Once you sign to the programme, you must behave! It is strict discipline. You cannot start a course of Tuberculosis medicine and discontinue midway because of the inconvenience associated with it. I know the IMF programme can fail in Zambia if it is left to the government alone to manage it.
The only other critical player capable of helping the government implement the medicine for the full course of the programme is civil society. The IMF itself fully appreciates the role that civil society plays in ensuring government fully commits to the terms of the loan agreement. This is the reason Action Aid country Director Nalucha Ziba and colleagues are pushing for the Government and the IMF to fully disclose the terms of the agreement. Though I doubt there are any undisclosed information on the terms of agreement, I support the position taken by civil society that they should understand what has been agreed. This is because of the role that civil society will play going forward.
The IMF deal captures several areas that will define government focus and they basically form the terms of the agreement. For example, there will be need to rationalize subsidies on energy and agriculture, reform of non-performing parastatals, increase revenues, prudent expenditure, rationalise debt acquisition, transparency, and accountability in disbursement of social cash transfer, effective procurement systems and elimination of corruption. The IMF will closely monitor how government manages all these elements. These will form part of the milestones for further disbursement of funds.
One way IMF will monitor the behavior of government is through Ministry of Finance data, the periodic information that government agencies will release. The IMF, through its local office, will occasionally access media reports to ascertain the efficacy in the implementation of the terms of the agreement. For example, if there is any piece of information on corruption in government, IMF will take that as a lead to have responses from government. If there is a story saying elderly women in Kasama have not received social cash transfers for two months (possibly due to technical glitches), the IMF will want to have an explanation from government.
However, much of this feedback on the roll-out of the IMF progamme will come from civil society. The IMF has always engaged civil society in Zambia as part of the Article IV consultations. This engagement will deepen. Civil society will be the whistle blowers about any misbehaviour by government.
Civil society has its eyes everywhere, including in the communities. It is for this reason government and civil society will need to quickly orient themselves about what is expected of each other in the next three years and even beyond. The IMF deal will certainly succeed but with the full involvement of civil society.