ANALYSIS-New IMF plan could boost African

ANALYSIS-New IMF plan could boost African

growth

09:41 a.m. Jan 19, 2000 Eastern

 

                        By Luke Baker

 

                        LIBREVILLE, Jan 19 (Reuters) - The IMF's new lending

                        initiative for the world's poorest nations gives African leaders

                        more say in their affairs, but the continent -- torn by war and

                        AIDS -- must come up with prudent strategies to make it work.

 

                        Twenty African leaders ended an anti-poverty summit with senior

                        International Monetary Fund officials in Gabon on Wednesday

                        enthused about the Poverty Reduction and Growth Facility

                        (PRGF).

 

                        The programme seeks to stimulate growth without ignoring social

                        priorities such as education. It replaces the Enhanced Structural

                        Adjustment Facility, a benchmark for African macroeconomic

                        restructuring for the past decade that was criticised for its tough

                        targets.

 

                        The new programme takes a gentler approach, putting the onus

                        for designing an adjustment programme on the loan recipient and

                        seeking to take into account views of development agencies,

                        unions and others in civil society.

 

                        Gabon's President Omar Bongo echoed the words of IMF

                        Managing Director Michel Camdessus in describing the scheme

                        as a new hope for the world's poorest continent.

 

                        ``It's now up to us to formulate adequate strategies capable of

                        giving hope and confidence to the people of Africa,'' he said. ``But

                        we can only carry out this task with the help of our external

                        partners.''

 

                        Some Western lenders and IMF officials said the PRGF could lay

                        a solid foundation for growth. But privately they expressed

                        disappointment that the leaders showed no signs of meeting the

                        IMF halfway and questioned how much would in fact be done, let

                        alone right away.

 

                        ``It's a bit like visiting a doctor. Everyone feels good after hearing

                        what's wrong and leaving the consulting room, but do they actually

                        swallow the medicine and follow the prescription through to the

                        end?'' a World Bank official said.

 

                        LACK OF PROMISE

 

                        While the IMF has shown its concern for criticism by revising its

                        methods, there was no matching promise from the governments to

                        fight Africa's primary scourges: AIDS and war.

 

                        The heads of state at the three-day summit, backed by ministers

                        and a slew of central bank officials, promised to do their utmost to

                        promote growth and fight poverty and corruption.

 

                        ``We recognise that poverty reduction is a challenge which we

                        must address ourselves,'' they said in a statement. ``We are

                        determined to move ahead in confronting this challenge head-on,

                        with the support of our development partners.''

 

                        Growth has picked up in many African countries since 1995, but

                        there has been no visible rise in living standards for the poorest

                        300 million people, who live on less than $1 a day.

 

                        Camdessus said gross domestic product growth of between five

                        and eight percent a year would be key to the programme's

                        success, but that is close to double the present average.

 

                        The IMF, World Bank, African Development Bank, European

                        development agencies and others have been propping up the

                        continent, particularly sub-Saharan Africa, for decades.

 

                        Half the sub-Saharan countries -- 22 of 44 -- are already

                        receiving aid through various IMF lending facilities or standby

                        loans. Others are expected to try to access the new programme.

 

                        Stanley Fischer, first deputy managing director of the IMF, told

                        Reuters he expected 36 to 41 of the world's poorest nations to be

                        covered by some new poverty initiative by year-end.

 

                        A VIRTUOUS CIRCLE

 

                        Camdessus, who steps down next month, has described growth as

                        the catalyst for a virtuous circle which, coupled to monetary

                        stability and fiscal diligence, would ease the worst poverty.

 

                        The theory is sound, but there are many other obstacles.

 

                        More than 23 million Africans are estimated to carry the HIV

                        virus that causes AIDS and the rate of infection is growing with

                        10,000 people infected each day.

 

                        Nine out of every 10 children infected with HIV live in Africa,

                        meaning the continent will be further handicapped against the rest

                        of the world for years to come.

 

                        Aside from the grave social costs, the disease will have a

                        profound impact on productivity.

 

                        Then there is war.

 

                        Fifteen African countries are engaged in either civil war or

                        cross-border fighting and conflict continues to spread. Military

                        spending as a proportion of GDP in many countries is far higher

                        than even that of the superpowers during the Cold War.

 

                        ``That is the face of Africa that is not the face we wish to

                        maintain,'' Jean-Louis Sarbib, vice-president of the World Bank,

                        told leaders at the opening of the summit.

 

                        Though there is little indication that Africa's leaders are ready to

                        tackle AIDS head on or to end the conflicts tearing at the

                        continent, the IMF believes the new programme will help to

                        change policies in Africa to make growth more deep-seated.

 

                        ``There are a lot of incentives on offer for countries to pursue

                        better policies...leaders understand that if they deliver, it will be

                        okay, things will improve,'' said Fischer.

 

 

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