Being a ''Good Pupil'' Can be Bad for You

Pilirani Semu-Banda

BLANTYRE, Apr 17 (IPS) - Five years after the famine in which more than 1,000 Malawians died and 8 million of the country's 12 million people suffered from hunger, the bitter memory of bad policy advice still lingers on.

The International Monetary Fund (IMF) and the World Bank were blamed for the tragedy that hit Malawi during the 2002 famine. The international human rights organisation Action Aid, for instance, indicated in a report in October 2002 that the IMF had instructed the Malawian government to sell the strategic grain reserve to repay a debt incurred by the statutory National Food Reserve Agency (NFRA).

The report, ‘‘State of disaster: Causes, consequences and policy lessons from Malawi'', also mentioned the World Bank. Action Aid blamed the Bank for ‘‘forcing'' Malawi to sell maize to Kenya to service an outstanding loan which the country owed the Bank.

Then President Bakili Muluzi also publicly disclosed that the Bank had been encouraging the government to keep foreign exchange instead of grain reserves. The latter, the Bank argued, could lose value.

However, both the IMF and the World Bank parried off these accusations by saying they had ‘‘merely'' advised the government on its grain reserves.

They pointed out that the causes of food shortages in Malawi were complex and included lapses in the government's early warning systems, distortions in domestic markets and the mismanagement of food reserves.

Following the accusations and counter-accusation, relations between the donor agencies and the government were strained. This led to a delayed donor response to the continuing food crisis.

Malawi has been highly dependent on donor support for four decades. The donor funds it has received account for approximately 40 percent of the national budget. The country cannot afford to bite the hand that feeds.

Therefore, despite the alleged causes of the food crisis, the government completed economic reforms in adherence with conditionalities set by the Bank and the IMF. As reward, the institutions cancelled most of Malawi's external debt of about 2.97 billion US dollars in September 2006.

The memory of the famine and its possible causes lingers on. Some Malawians want the country to escape from the grip of these agencies.

Director of the United Nations Research Institute for Social Development, Thandika Mkandawire, a Malawian himself, is one person who is wary of the country's relations with donor countries and agencies.

He says despite Malawi being tagged a ‘‘good pupil'' of the Bank and the IMF between 1980 and 1990, the country stands out as an indictment of aid relations over the past three decades.

Between 1979 and 1999 Malawi earned a place among what the IMF characterises as ‘‘very prolonged users'' of its facilities. The country had six programmes with the IMF. In 17 years out of the 20-year-period Malawi was under one IMF programme or another.

‘‘In the IMF and World Bank documents evaluating the policy performance of African economies between 1981 and 1998, Malawi tops the list of ‘good adjusters' with seven appearances, followed by Uganda and Kenya with five each,'' says Mkandawire.

Despite such ‘‘accolades'', Malawi's per capita income fell from 156 US dollars in 1980 to 143 US dollars by 1990. Even by 2003 Malawi had yet to reach the 1979 level of per capita income, according to World Bank figures.

A poverty and vulnerability assessment released last year by the government and the World Bank shows that there has been little progress in reducing poverty and inequality.

The combination of bad policy advice and authoritarian rule has produced two lost decades for Malawi, states Mkandawire.

He is unimpressed by the agencies' admissions of error or by the Bank's Poverty Reduction Strategy Papers. Their advice has led to the collapse of public investment in physical and human capital, he argues.

‘‘What they do not seem to recognize is that the accretion of errors has produced economies that are maladjusted and caught in a low growth trap,'' says Mkandawire.

Mkandawire is especially concerned about how the external interference contributes to the loss of African states' sovereignty. In 2002 the IMF suspended its economic assistance due to what it regarded as consistently poor economic management by former president Muluzi.

The IMF only renewed the programme after the Bingu wa Mutharika administration, which assumed office in May 2004, agreed to the implementation of the prescribed policies being monitored. In this way a consistent track record of policy execution was established in order to win back donor support.

The implementation of the policy in the first year saw the IMF and the Bank rewarding Malawi by cancelling 90 percent of the country's foreign debt.

The debt pardon translated into Malawi saving US $100 million of import cover annually as the country retained capital which would have been spent on servicing the debt.

Import cover is the available amount of foreign exchange reserves with which a country can import goods and services over a certain period of time even without fresh foreign exchange inflows.

Head of policy at Action Aid Malawi, Collins Magalasi, is also not satisfied with the conduct of donor agencies.

He calls on Malawi's biggest bilateral donor, the British government, to increase its financial aid which in the past five years has averaged about 54.1 million pounds per year, accounting for only 0.0009253 percent of the UK's gross national income.

Magalasi laments that 70,000 Malawians die every year from preventable diseases. People's incomes combined do not equal the agriculture subsidies that the European Union spends on its farmers.

While expressing his satisfaction with the donor aid the country receives, Mutharika has also called for ‘‘home-grown economic policies that should be supported by cooperating partners''.

In the 2005/2006 financial year the government started implementing a locally developed policy called the Malawi Growth and Development Strategy (MGDS), a plan that runs over five years.

Mutharika regards the new strategy as a vehicle to shift priorities as it was designed by Malawians. At the same time it works towards the restoration of fiscal discipline.

The donors have supported the policy, apparently agreeing to allow space for Malawian designed policies; and for ordinary people rather than just economists to be involved in the policy formulation to ensure ownership.

Executive director of the Malawi Economic Justice Network (Mejn), Andrew Kumbatira, agrees that the MGDS is a home-grown economic policy in which local input has been given a lot of space.

He admits that ‘‘there are, of course, similar policies in other developing countries. This indicates that the policy is still donor-guided. But the good thing about this new policy is that the local consultations were extensive''. (END/2007)