IMF and Zaire

The I.M.F.
in Africa: Unnecessary and Undesirable Western Restraints on Development

Author(s): Andrew I. Schoenholtz
Source: The Journal of Modern African Studies, Vol. 25, No. 3 (Sep., 1987), pp. 403-433
Published by: Cambridge University Press
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The Journal of Modern African Studies, 25, 3 (1987), pp. 403-433
The L.M.F. in Africa:

Unnecessary and Undesirable
Western Restraints on
Development
by ANDREW I. SCHOENHOLTZ*
The International Monetary Fund has established itself as the mo

important economic actor among the many international agencies
our day. Indeed, the most powerful market-economy governments and
banks now look to it for leadership in assessing and resolving the key
difficulties of world finance. But the I.M.F. has yet to resolve the majo
problem that it faces as an institution and that its most influenti
members refuse to recognise as they try to fashion a world economic
order: dominated politically, legally, and institutionally by the market
elite, the Fund has yet to make the cultural and political leap necessary
to understand and work with, rather than against, the majority of its
members who are in the Third World. Until the I.M.F. does so, it w
continue to be harshly criticised and distrusted by the less-develope
countries (L.D.C.s), and it will never achieve either its economic an
political potential as a major international agency, or its supposed goal
of ordered world economic prosperity.
In the hopes of eliciting an eventual change in how the I.M.F. dea
with the serious North/South problem, this article presents a political
economic, and legal analysis of why its policies towards L.D.C.s ar
what they are today. In doing so, attention is focused on those wh
determine contractual relations between the Fund and the developin
countries - both the powerful member-states, especially the Unite
States, and the professional staff that negotiate actual deals. One
African government's relations with the I.M.F. is explored in som
detail as a case-study of Fund policies in action. Zaire provides ampl
opportunity for such an investigation, as it has contracted financi
arrangements with the I.M.F. on eight occasions since 1975.
More than 30 African nations have turned to the I.M.F. in the las
* Lawyer, Washington, D.C.
404 ANDREW I. SCHOENHOLTZ
several years for 'assistance'. Most are not new

37 L.D.C.s whose multilateral debts required
by the Paris Club, the major organisation
Currently, the I.M.F. is supporting economic a
in I9 African countries, and in the recent pa
negotiate low-conditionality funds.1 These L
I.M.F. as 'a lender of last resort', largely beca
function has been defined by the West. The Fund can assert
considerable power precisely at the moment of any crisis because it has
been delegated the necessary authority by governments and capital
markets - by all major sources of credit in the developed capitalist
world, including private lenders, official aid agencies, and investment
institutions, as well as multilateral organisations, such as the World
Bank - to refuse to lend to any nation that does not follow its 'advice .2
Today, the I.M.F. has I 51 members: the rich western countries, over
100oo L.D.C.s, and a handful from the eastern bloc, including Yugoslavia,
Romania, Hungary, China, Vietnam, and Laos.3 Since the L.D.C.s
constitute such a great majority, how and why does the Fund continue
to be such a western-controlled institution?
THE ORGANISATION OF POWER AT THE I.M.F.
Designed by two major post-World War

States and the United Kingdom, the I.M.F
western control. The most important legal enti
Executive Board and its Managing Director.4
I.M.F. staff (who handle all routine business),
a West European in accordance with a trad
original designers, whereby as a quid pro quo an
the World Bank. The Managing Director is se
1 Ekwow Spio-Garbach, 'A Strategy for Africa's Financial M

(New Brunswick), 29, 5, September-October I984, p. 76. I
adjustment programmes reported in this article as a result of
I.M.F.'s African Department. For the I.M.F. and the Paris Clu
Money and Power: banks and the world monetary system (Bev
conditionality loans place fewer and less particular burdens
thereby giving it more freedom to determine its economic poli
2 Cheryl Payer, The Debt Trap: the International Monetary Fund
I974), p. x.
3 E. A. Brett in Latin America Bureau (ed.), The Poverty Brok
(London, I983), p. 26.
4 Overall authority within the I.M.F. rests with the Board of G
and (usually) consists of all the members' Finance Ministers.
policy issues, mostly reports, and do not exercise any effective
THE I.M.F. IN AFRICA 405
Directors, who reflect national economic power

I.M.F.'s funding and borrowing system known as
the 22 Directors are appointed by their governm
U.K., France, West Germany, Japan, and Saudi
others are elected by various country grouping
behalf of all their members.
Even though Executive Board decisions are usually reached by
consensus, the weight attached to each Director's point of view reflects,
in the last resort, the vote(s) that he or she commands. Four major
blocks can be identified: (i) the U.S. alone controls 20 per cent of the
votes; (2) about 28 per cent are held by a number of powerful West
European nations; (3) an intermediate group that includes 21 L.D.C.s
(with more than 7 per cent of the votes) is represented on the Board by
richer, 'northern' nations;' and (4) an L.D.C. bloc (including Saudi
Arabia), controls about 34 per cent of the total votes.
In part due to the legal design that has translated economic into
voting power, L.D.C.s can exercise only a very limited influence on the
Board's decision-making process. A completely united L.D.C. group -
albeit very difficult to achieve - representing about three-quarters of
the total population of I.M.F. countries, can muster no more than one-
third of the votes. Moreover, the constitutional Articles of Agreement
provide the United States with an effective veto, because any major
changes, such as the allocation of votes, requires an 85 per cent
majority.2
This legal set-up comes as no surprise to those familiar with the
creation and real politics of the Fund. The Group of 77 was nowhere
to be found at the Bretton Woods Conference in July 1944. The
'original sin' of the I.M.F., as some have called it,3 derives from the
domination of this international institution by the industrialised
capitalist economies. The views of several Latin American governments
were heard at Bretton Woods, but the few other third-world countries
present were mostly under direct British or U.S. influence at that time.
Many observers argue today that the decisions endorsed as official
I.M.F. policies are made by the most powerful market-economy
nations, represented by the Group of Ten. This includes the five
permanent members on the Executive Board - the U.S., the U.K., the
1 In 1979, for example, Spain represented Costa Rica, El Salvador, Guatemala, Honduras,
Mexico, Nicaragua, and Venezuela, though the latter had a larger quota than Spain.
2 Brett, loc. cit. pp. 26-8.
3 Ismail-Sabri Abdala, 'The Inadequacy and Loss of Legitimacy of the International
Monetary Fund', in Development Dialogue (Uppsala), 2, 1980, p. 37.
15 MOA 25
Federal Republic of Germany, France, and Japan -

Italy, the Netherlands, Belgium and Sweden, wh
Switzerland in 1984. As The Guardian concludes: 'If
can agree on something, then it will go through.'l Th
reveals not only the source of present restraints o
regard to the Third World, but the limits of the I.M.F
particularly of the Executive Board. According t
Statement on the International Monetary Syst
World' issued as the final communique of a I9
conference of economists and politicians held in J
The Fund's legitimacy has... been undermined by the fact
of industrialized countries that dominate it have never hesitated to break the
IMF rules when it appeared to suit their interests, take major decisions on
monetary matters among themselves outside the framework of the Fund, and
treat the Fund with impunity when they wished.2
The Group of Ten exerts control over important I.M.F. decisions by

functioning as a mechanism for negotiation among themselves prior to
presenting their positions to the Fund membership.3
The western powers originally conceived of the Fund's present unit
of currency, the Special Drawing Right (S.D.R.), as intended for use
only by major trading and financing countries. It took the intervention
of the Fund's Managing Director, acting on pressures from the
disadvantaged, before the new reserve asset could be made available to
all I.M.F. members.4 The S.D.R.s do not directly address needs,
however, because they are allocated according to quota contributions
- the Fund's assessment of a member's economic strength - and even
then they require 85 per cent approval, which means, inter alia, that
1 Brett, loc. cit. p. 28.

2 'The Terra Nova Statement on the International Monetary System and the Third World',
in Development Dialogue, I, 1980, p. 30. See also the Report of the Director-General for
Development and International Economic Cooperation, 'Towards the New International
Economic Order', New York, United Nations, 1982, p. I8; and F. Parkinson, 'The IMF in
Economic Development: equality and discrimination', in Journal of African Law (London), 26, I,
Spring 1982, p. 22.
3 'Background Notes on the International Monetary Fund', in Development Dialogue, 2, 1980,
p. 103. The monthly meeting of the Bank for International Settlements in Basel, Switzerland,
provides an opportunity for the central bank governors of the Group of Ten to maintain regular
contacts.
4 Benjamin J. Cohen, Organizing the World's Money: the political economy of international monetary
relations (New York, 1977), p. 151. S.D.R.s were created in July I969 as a form of international
reserve asset to replace the dollar as the Fund's official unit of account. They are allocated to
members as a supplement to other reserves, and they function as credits in their accounts with the
I.M.F., which can be used to buy hard currencies in times of debt or balance-of-payments
problems. Members pay interest to the Fund on the balance of their holdings below their
allocation, and they receive interest when their holdings are above their allocation.
they can be vetoed by either the Unite

bloc.1
While the power of the major wester
hardly be over-emphasised, their unity is
the L.D.C.s be thought of as a single o
elsewhere, because they are not. One
indicating such divisions occurred ove
western powers to benefit the least-devel
of Fund gold:
the agreement to sell one-sixth of the gold is
that, in one fashion or another, all 'devel
prorated share of that at market prices. Th
distribution to the poorest countries will arise
thirds) that was originally subscribed to the
effect, moderately wealthy countries such
refused to aid in this fashion such despera
Bangladesh, even though the arrangement wo
to them... The precedent is a bad one a
developed countries. France in the end aba
IMF's gold should be returned to its origi
officials have been heard to mutter that perh
the IMF to get their gold, and two Amer
bill in Congress that would insist on dist
(fortunately, the bill has little chance of pass
On the whole, the Group of 24 - eight m

continents, representing the L.D.C.s in
- exerts little influence at the I.M.F., an
has distanced itself from its constituency
Ioo).3 This may be due in part to the inst
According to a journalist who manage
information barriers that the I.M.F. attem
world', and to interview more than half
their alternates:
The IMF world is dominated by middle-aged economists.. .whose personalities

tend to be as reserved as their suits. Conversation at the Fund is heavy with
terms like 'conditionalities', 'post-shortfall adjustment periods' and other
bankerly jargon. The directors talk and act alike, whether they are from Libya
or England. You rarely see Africans in flowing robes at the IMF. You rarely
see emotion of any kind.
Peter Saladin, 'The Link Between the Creation of Special Drawing Rights (SDRs) and
Development Finance', in Development Dialogue, i, I98I, pp. 38-46.
2 Richard N. Cooper, 'Monetary Reform in Jamaica', in Edward M. Bernstein et al.,
'Reflections on Jamaica', in Essays in International Finance (Princeton), 115, April I976, p. 12.
3 Brett, loc. cit. p. 29.
15-2
Directors usually learn about loan proposals at polite, in

the Managing Director or in staff memos so delicately
wouldn't understand them. Any objections are resol
same ultra-polite way. Later, the IMF's department o
tell the press what the Fund wants made public, s
better.
Within anyone's memory, these 22 men (the Executive

said no to anything proposed to them at a board meetin
Legally, the Executive Directors do not 'repr

appointing or electing them: they are not paid by
legally subject to their control, and they cannot b
term of office. But, in fact, they do represent the
to a former U.S. Executive Director and and lat
Director of the Fund.2 They voice national interes
who receives loans and what kinds of loans they r
A major I.M.F. loan to South Africa, for exam
provoked criticisms from some black African nati
their wish not to ease economic pressures on th
Although a few western and other L.D.C. memb
support that opposition, the Africans gave way.
The answer seems to lie in the rigid traditions of the IM
dominance even in changing times. Many directors
basically understand that it is in their government's in
out of the IMF and to limit the fund's power to change
countries.
'If it ever came down to what country you like and what country you don't,
Zaire and some of the others might not fare very well', said one European
director.
Another director wrapped up the feeling of his colleagues who represent a

majority of the voting power: 'I think the way the African executive directors
reacted was admirable - they didn't want to break the rules of the game.'4
But the Africans are caught in an odd situation. They are pressured
into keeping politics out of Executive Board decision-making when the
controlling western powers so desire, yet they can do virtually nothing
about the political favouritism of the single most important voting
member, the United States. According to the so-called Arusha
Initiative:
1 Jonathan Kwitny, 'Going Along: how IMF overcame political issues to vote a loan to South
Africa', in Christopher A. Kojm (ed.), The Problem of International Debt (New York, I984), pp.
117-18.
2 Frank A. Southard, Jr, 'The Evolution of the International Monetary Fund', in Essays in
International Finance, 135, December 1979, p. 4.
3 Cohen, op. cit. p. 206. 4 Kwitny, loc. cit. pp. 44-5.
the IMF is not objective in the application of its

standards have been applied to similar situations. Examp
countries, because of their geographical situation, in
political orientation, receive more lenient treatment th
From the L.D.C. perspective, the problem with the

treatment, due to effective lobbying on behalf of s
Executive Board, is that the chief sufferers are
political importance.2
Since 1981, the Reagan Administration has 'f
paign in the boardrooms of Washington' to ma
financial institutions cut off their loans to Nicarag
to El Salvador and Guatemala instead.3 In that y
for $36 million from El Salvador was pushed th
Board despite numerous technical (not political) p
ill advised and in violation of I.M.F. 'rules'. The Fund's technical staff
had refused to support this particular application, and the Executiv
Board had never previously approved any loan without their
concurrence:
The particular loan facility to which El Salavador was applying ha

technical rules which the IMF had scrupulously adhered to in
right to borrow from the Compensatory Financing Facility
forecast of a country's future export earnings, a forecast t
demonstrate (i) that the country was suffering from an export s
(2) that the shortfall was temporary. The staff had concluded tha
were too unsettled in El Salvador to permit a realistic projecti
exports and rather than make up imaginary numbers had dec
any projection at all. But access to the Facility was not allowe
forecast. Without it there was no way to determine whether the
temporary.4
These arguments shocked this decision-making body of

economists, not least because they were presented by th
Director from the Netherlands, J. J. Polak, who spoke with
able authority having been formerly director of research f
in charge of preparing the commodity forecasts for the Co
1 'The Arusha Initiative', in Development Dialogue, 2, I980, p. 14.

2 Mary Sutton, 'Introduction', in Tony Killick (ed.), The IMF and Stabiliza
country experiences (New York, 1984), p. 14.
3 The United States has historically opposed loans to numerous left-wing gov
description of such positions taken against e.g. Grenada, Chile, Laos, Ca
Mozambique, and Uganda, see Kwitny, loc. cit. pp. I20 and 127-30. American
Fund continue to be influenced, of course, not only by both Executive an
strategies, but also by the important r6le played by domestic politics.
4 Brett, loc. cit. pp. 44-5.
4IO ANDREW I. SCHOENHOLTZ
Financing Facility. The loan was opposed by t

except Italy, on the grounds that it broke the ru
by the L.D.C.s, despite some reservations, becau
South division, the members of the Third World
urge easier conditions on fund loans, whether com
While the Reagan Administration usually ord
conditionality, the U.S. Executive Director, Richar
loan in this case, backed by Canada, Italy, and
securing 57 per cent of the votes. Requiring a sim
passed.1
The Reagan Administration came into office pledging to reduce U.S.
financial support of organisations, such as the I.M.F., which it
regarded as insufficiently responsive to American foreign-policy
objectives. But as countries of strategic concern to the United States
approached the financial abyss, the Administration not only turned to
the I.M.F. for aid, but helped to increase considerably its role in world
economic affairs. The loan designed to resolve Mexico's debt crisis, for
example, involved three months of negotiations among Fund experts,
two Mexican Presidents, the finance ministers of a dozen western
nations, and several hundred private bankers. As the loan came before
the Executive Directors, Treasury Secretary Donald T. Regan and
Secretary of State George P. Schultz reached for support by publicly
suggesting that too much I.M.F.-induced austerity could bring about
even sharper contractions in world economic activity. Debtor countries
'are being told one thing by the IMF', according to Regan, 'to import
less and export more. How can the whole world do this simultaneously
and still maintain a trading system?' Schultz criticised the proliferation
of 'austerity-type programs' throughout the world, and urged that
economic policies in 1983 be aimed at achieving expansion.2
But the Reagan Administration wanted to target its participation in
the Fund to countries it supported politically. It thus insisted later in
1983 that increased I.M.F. funds should not mean increased access to
loans for all countries. The Administration stance, part of an effort to
secure Congressional approval for the U.S. share of the quota increase,
was opposed by every other member of the Fund.3 Regan lobbied
successfully on this matter at the joint annual meeting in Washington
of the I.M.F. and the World Bank:
1 Ibid. pp. 45-7.

2 Clyde M. Farnsworth, 'A Dramatic Change at the IMF', in Kojm (ed.), op. cit. pp.
101-2.
3 Foreign Policy Association Editors, 'How the IMF Works', in ibid. p. 94.
THE I.M.F. IN AFRICA 4II
One man stands alone among the representatives of

gathered here this week to try to ease the pressures
system. He is the head of the American delegation, Tre
T. Regan, and his position marks a departure in the pos
Western member.
Beginning with the weekend and through most of the week, participants.. .are
trying to negotiate means of rescuing countries - rich as well as poor - when
inflation, high interest rates and external forces such as world recessions and
erratic oil prices topple their economies.
To the palpable furor of the poor nations, the United States has been getting
what it wants. Sunday, in a bitter meeting that ran past midnight, Mr Regan
dominated a successful battle against the developing countries' appeal to
continue a program that allowed them to borrow up to six times as much as
each is normally allowed under the fund's system of quotas for individual
countries.
'It was disastrous for the developing world,' said Manmohan Singh, Governor
of the Reserve Bank of India. 'We have never had such a raw meeting with
the developed countries.'"
As in other international organisations, national interests define

many of the limits and powers of the Fund. Both the Executive Board
and the Board of Governors represent member countries, and thus their
political concerns. In contrast, the Managing Director of the Fund and
his staff have the potential to represent the 'broader policy interests' of
the so-called 'international community'. But in reality the latter
consists of various groups with conflicting aims and outlooks, so that
'broader policy interests' may translate into nothing more than the
vision of a cautious economist, influenced by his background and
education. Needless-to-say, the Managing Director must work with the
Executive Directors, not least because he was selected by them. Here
again, a major decision is made in an extra-legal manner by a select
few, this time the powerful Western European bloc at the Fund. Their
consensus, which is usually accompanied by the support, or at least the
acquiescence, of the United States, essentially determines the outcome.2
However, while the Managing Director and his staff are hardly
autonomous policy-makers, there is evidence, not surprisingly, that
they are extremely influential,3 even though the Articles of Agreement
1 Peter T. Kilborn, 'Tough Talk by U.S.: new development for IMF', in ibid. pp. 131-2.
2 Farnsworth, loc. cit. p. 103. In 1983, the Reagan Administration supported the western
European consensus on a second five-year term for Jacques de Larosiere after his achievements
concerning the debt crisis. Paul Volcker, Chief of the Federal Reserve Board, also voiced strong
support for the Director's new activism. De Larosiere turned over the helm of the I.M.F. to a
fellow Frenchman, Michel Camdessus, on i6 January 1987.
3 Southard, op. cit. pp. 7 and Io.
41I 2 ANDREW I. SCHOENHOLTZ
grant major powers to the Executive Directors

act largely on presented recommendations, an
Director's need, both legal and practical, to wo
Indeed, the by-laws direct him to discover
Executive Board, and I would argue that bo
implementation of Fund policies do incorporat
way of thinking of the majority vote.
This qualification does not mean, however
Director and his staff cannot themselves help to
Such initiatives, of course, can only be of a mode
'radical' European would ever be appointed by
head the I.M.F. Moreover, since the Managing
wide support for his measures - both among E
staff- even moderate proposals are likely to be
tions. Jacques de Larosiere arrived at the I
disagreement about its role, and some commen
tried to move the Fund in new directions:
De Larosiere faced a whole new set of problems in the summer of 1979 when
the second oil crisis again wrecked the balances of payments of developing
countries. It was now still harder to argue that the countries in difficulties only
needed a short sharp shock to 'adjust' or pull themselves together. He was
convinced that the Fund must adapt its character to provide longer and more
lenient loans; and he wanted to encourage multilateral investment in the third
world, rather than more lending. But he was up against opposition from
executive directors and from many of his staff who see any relaxing of
discipline as encouraging inflation and irresponsibility.'
How committed de Larosiere was to the L.D.C.s is difficult to know,

since the Fund does its best to keep its discord private.
The Managing Director was always less visible and comprehensible than the
President of the World Bank, with less freedom from his executive directors.
He usually only talked publicly to fellow specialists; interviews were
traditionally never attributed, unless to 'sources close to the managing
director', and his arguments with his board were only rarely revealed by leaks
from other offices.2
I would argue that the successful containment of differing views within

the Fund suggests that the degree of disagreement is not so vast or
meaningful, especially in comparison to criticisms of the Fund from
without. As to when the Managing Director does speak openly in Fund
documents, it is very hard to separate truth from public relations. In
I981, de Larosiere stated that
1 Anthony Sampson, The Money Lenders: bankers and a world in turmoil (New York, 1981),
p. 304. 2 Ibid.
THE I.M.F. IN AFRICA
4I3
while we continue to stress the importance of

management, we now systematically emphasize t
productive base of the economy and we contemp
therefore, need our financing for longer periods.'
Critics would query the meaning of'systemat

'contemplate'. In any case, even if de Larosie
periods and low conditionality, at best he help
in the duration of loans. Otherwise, as we shall s
seems to have been the rule. If anything, the
severity of conditions by raising interest rates c
As with the Executive Board, the Managing
with his staff, and from a legal perspective, the
relatively unified unit. By and large, they
suggested above, he may from time to time be o
colleagues. While interested Executive Directo
key staff appointments,2 the Managing Direc
institutionally most conservative actors at the
great deal of inbreeding, resulting from prom
together with shared educational backgrounds
ern, usually U.S. post-graduate - this has ensured
prove to be powerful, especially at middle
Moreover, of the I,500 posts, a disproportiona
by Americans and British, while the approxim
developing countries are mostly in relatively jun
way, the staff of the I.M.F. replicate its politica
western domination.
The Fund has two key Departments: Exchange and Trade Relations,
and Research, both strongly influenced by some of the earliest members
of staff, the Director of the latter being credited as the source of the
I.M.F.'s monetarist prescriptions. It is an American who is generally
the second most important person in the regional Departments, thei
Directors having been appointed after consultation with, and some
lobbying by, the respective region's Executive Director(s). Thus the
Director of the African Department is a citizen of Burkina Faso, with
a Ph.D. in economics from the University of Pennsylvania. His
predecessor was a Zambian, with a Ph.D. in economics from the
University of Colorado, whose Deputy Director was an American with a
1 Jacques de Larosiere, IMF Survey (Washington, D.C., 1981), p. 35, quoted by Sidney Dell
'On Being Grandmotherly: the evolution of IMF conditionality', in Essays in International Finance
144, October 1g98, p. 27.
2 Southard, op. cit. p. 8. 3 Sampson, op. cit. p. 296.
Ph.D. in economics from Vanderbilt University.1 The

Caribbean Department is reputed to be the mos
called the 'Western Hemisphere Department', it
American who is another 'old hand'.2
The Fund staff plays an important role in structuring and negotiating

loans. For a country to borrow from the Fund, it must request a visit
by a staff mission, which consists of usually no more than five analysts
plus a secretary. Although 'sorting out' L.D.C. affairs has at time
proved to be a formidable task, only about eight people were out i
either Mexico or Argentina at any one time. The mission chiefs fir
job begins in the Washington D.C. headquarters, where he directs th
preparation of a brief, setting out the known economic circumstances
of the country, the extent of the financial assistance that the I.M.
might be prepared to provide, and the kind of conditions required i
return. The 'top management' must approve the brief and indicate the
team's room for manoeuvre without referring back to headquarters at
every stage of negotiation.
The mission visit then begins with a round of social calls to fix
timetable with host participants. Some time is needed to check, correc
and update the facts. Team members take charge of particular area
the real economy (output, labour, prices, and wages), money and
banking, public finance, and the external economy. Then the missio
tries to fit information from these areas together in a consistent way
As negotiations move towards the first drafting of a letter of intent,
the mission chief keeps in touch with the Managing Director, for he wi
later ask the Executive Board to approve the final letter. An account of
the I982 Mexican negotiations suggests the dynamics involved:
Until this stage, the mission has held its brief close to its chest, but now could
be the time to let the other side have a peep at it if there seems to be no meetin
of minds. A reduction in subsidies and freeing of interest rates were ba
enough for Mexico to accept, but the hardest tussle was over the reduction of
the public-sector deficit. The IMF originally wanted it brought down from
this year's level of I6% of gross domestic product (gdp) to 5 % in 1983 an
to almost nothing by I985. The Mexicans protested this was cruelly severe and
that elimination should not be contemplated until I988. They made direc
appeals to Mr de Larosiere. The long fought-over compromise was to go fo
8-5% in I983, 5-5 % in I984 and 3-5% in I985.3
1 I.M.F. Press Release No. 84/35 in Finance and Development (Washington, D.C.), 21, I, March
1984, p. 7, a joint publication of the I.M.F. and the World Bank.
2 'Background Notes on the IMF', p. 102.
3 Marjorie Deane, 'Financial Missions and Missionaries', in Kojm (ed.), op. cit. pp
98-oo100.
THE I.M.F. IN AFRICA 4I5
The letter of intent, if accepted by the Executive Direc

requesting member-state of a right to draw funds over
one to three years) should the need arise, rather th
anything immediately. The 'facilities' involved in s
agreement' are often characterised by their high con
government must meet prescribed conditions all
preconditions before drawings are approved, perfo
which make further drawings contingent, and policy
which are broad commitments without specific sanct
CONDITIONALITY: POLICY AND PRACTICE
Conditionality continues to be widely criticis

major source of debate within the Fund. A
industrial countries strongly support the prac
be traced back to the two principal designer
World War II, the British needed 'recovery
'development' today- but although Keyn
strongly against the concept of conditionalit
Americans, they eventually had to give wa
political reasons:
it was a desire to enlist the cooperation of the U.S.
credit that prompted other Fund members to give
the question of conditionality, rather than any con
adoption of the U.S. concept...was indispensable for
IMF.2
The Fund's practice illustrates that the conditionality principle is not

set in stone. At times the I.M.F. has leaned in one direction, as in th
mid-Ig970s, when it established 'oil facilities' at low conditionality; a
other times, such as the present, it has emphasised more exacting
conditions. According to one of the Fund's legal experts, 'the
relationship is not fixed, and a prevailing balance may be modified i
favor of milder conditionality if circumstances make this change
advisable '.3
Of central concern to L.D.C.s is when high conditionality should be
applied, and how much of their drawings should be made available much
more easily. Critics argue that fiscal and monetary restraints should be
1 John Williamson (ed.), IMF Conditionality (Washington, D.C., Institute for International
Economics, 1983), p. 666. 2 Dell, op. cit. p. Io.
3 Sir Joseph Gold, quoted in Dell, op. cit. p. 11. See also I.M.F. staff, World Economic O
(Washington, D.C., 1982), Occasional Paper No. 9, p. 25.
4I6 ANDREW I. SCHOENHOLTZ
applied only where and to the extent required

than across the board in a blunt manner. They
because the capacity of the Fund to provid
support at low conditionality has declined su
A serious question exists as to the economi
conditionality requirements. According to wha
consider to be the most extensive and rigorous
to date, 'the Fund usually prescribed a p
management, even in cases where its staf
demand to be a principal cause of balance-of-pa
inflexibility continues to persist, despite an Ex
March I979 about access of resources from
standby arrangements, which stated in part th
In helping members to devise adjustment progra

regard to the domestic social and political objective
and the circumstances of members, including the c
payments problems.3
In practice, the Fund disregards what it recogn

report as the two factors responsible for th
balance-of-payments deficits of non-oil-export
from I977-9: the deterioration in terms of trad
of servicing external debt, both beyond
situations, domestic deflation seems uncalled
does not arise from misjudgements in the cond
Moreover, the major impact of these two fa
that Fund prescriptions are unrealistic.
As long as the international environment remains c

ist anti-trade policies and deflationary macroecon
countries, the scope for adjustment through the dom
country governments will remain severely limited.
Moderate critics also look to the Fund Arti

declare employment, income, and economic
objectives, since it is precisely these which hav
1 Dell, op. cit. pp. i6 and 28.

2 Sutton, loc. cit. p. I4.
3 Williamson, op. cit. p. 667. See also Dell, op. cit. pp. I8-I
4 'Towards the New International Economic Order', p. 20.
5 'The IMF's Role in Developing Countries', in Finance and Development, 21, 3 September I984,
p. 26. This is an exchange between Tony Killick, Director of the Overseas Development Institute,
London, and Bahram Nowzad, Editor of Finance and Development.
THE I.M.F. IN AFRICA 4I7
imposed measures. The purposes of the Fund ac

include the following:
To facilitate the expansion and balanced growth of in

to contribute thereby to the promotion and mainte
employment and real income and to the developme
resources of all members as primary objectives of econo
To give confidence to members by making the general

temporarily available to them under adequate safeg
them with opportunity to correct maladjustments in the
without resorting to measures destructive of natio
prosperity.
In his interpretation of these purposes, Tony Killick highlights an

avoidable and undesirable Fund practice:
The balance of payments is seen as a constraint on the achievement of these
objectives, rather than an end in itself. However, over the years, the Fund's
emphasis on correcting disequilibria in the balance of payments has often
meant that the primary objectives have been pushed into second place. I
suggest that this pursuit of a single balance of payments objective, against the
multifaceted goals of national governments, is an avoidable source of friction
between the Fund and some developing countries.
Bahram Nowzad, editor of an I.M.F.-World Bank publication,

argues that a viable balance-of-payments is a critical ingredient in the
attainment of the other objectives:
Article I indeed states that the purposes of the Fund are, inter alia, to facilitate
the expansion and balanced growth of international trade, and to contribute
thereby to the objectives of employment, income, and development of all
members. The word 'thereby' is crucial: it does not diminish the importance
of the objectives but it clearly establishes how the Fund is to contribute to their
achievement... It is not accurate to say that the primary objectives have been
'pushed' into second place; they simply cannot be attained and sustained in
the absence of a viable payments position.
The costs of the biases resulting from the 'single objective' approach of
Fund conditionality are considerable, according to Killick:
virtually without exception, programmes are built around a balance-of-
payment objective; any targets for such variables as economic growth and
inflation are strictly subordinate to the balance-of-payment goal. Income
distribution objectives do not feature at all. Yet there are potentially large
economic costs involved in seeking to achieve economic restructuring largely
by means of demand management (although such management certainly has
an important role to play). I suggest that the Fund should be more willing
than it has been in the past to accept development and the other 'primary
objectives' identified in Article I as imposing constraints upon the design of
4I8 ANDREW I. SCHOENHOLTZ
adjustment programmes, and make a more conscious att

programmes which achieve adjustment in a least-cost man
Related to the selection of these policies is another ser

the Fund's inability to work with and understand t
L.D.C.s, who often see I.M.F. controls as manifest
independence western imperalism. It is the prescript
capitalist solutions to non-western societies that incurs r
Nyerere of Tanzania exemplifies this perception, which
regime's negotiations with the Fund:
The IMF always lays down conditions for using any of i
therefore expected that there would be certain conditions im
desire to use the IMF Extended Fund Facility. But we
conditions to be non-ideological, and related to ensuring that
us is not wasted, pocketed by political leaders or bureaucr
private villas at home or abroad, or deposited in priv
accounts.
Tanzania is not prepared to devalue its currency just bec

traditional free market solution to everything and regardless of
our position. It is not prepared to surrender its right to restrict
measures designed to ensure that we import quinine rather than
buses rather than cars for the elite.
My Government is not prepared to give up our national endeavor to provide

primary education for every child, basic medicines and some clean water for
all of our people. Cuts may have to be made in our national expenditure, but
we will decide whether they fall on public services or private expenditures. Nor
are we prepared to deal with inflation and shortages by relying only on
monetary policy regardless of its relative effect on the poorest and less poor.
The IMF... needs to be made really international, and really an instrument of

all its members, rather than a device by which powerful economic forces in
some rich countries increase their power over the poor nations of the world.2
PROBLEMS FACING REFORM
A serious attempt from within to reshap

international organisation has been made s
1974, the Committee of Twenty, which was cr
reported its results. Unfortunately the mem
from developed countries - could not agree
distributional criterion for the I.M.F.'s moneta
1 Ibid. pp. 21 and 23. See also Sidney Dell, 'Stabilization: th

in Williamson (ed.), op. cit. pp. 17-I8 and 27-8.
2 Julius Nyerere, 'No to IMF Meddling', in Development Dia
to direct more of the social savings afforded b

nations.1
The Outline of Reform stated that in the light of the

promote economic development, the reformed monetary sy
arrangements to help increase the flow of real resour
countries. One suggested method was to link the iss
development finance, either through direct distributi
countries of a larger proportion of SDR issues or throu
share of SDR issues to international and regional develop
The L.D.C.s concentrated most of their reform ener
link to development assistance. Despite the acceptan
to this proposal by all but two members of the
opposition of the United States and West Germ
failure. By way of compensation, it was suggested
Bank-I.M.F. Committee on Development should m
dations on ways to promote the increased transfer of
L.D.C.s. In addition, two new credits, both carefull
were created: a temporary Oil Facility to be phase
years by March 1976, and a permanent Extende
guaranteeing longer-term balance-of-payments financ
impact was minimal: indeed, only two drawings we
the latter credit during the first two years.3
Both the Committee of Twenty and its direct descend
Committee, were stymied by serious conflicts of
governmental positions:
Since governments believed that they could live with ea
civilized fashion even in the absence of a generally accepted
that they benefited from the existing state of affairs wer
to accept its early termination or even spell out the details
under which it might (not must) in future be terminated.
suffered were as reluctant to accept formal postponement
The stalemate resulted in principles that had no pra

example, one of the purposes supposedly most
I.M.F., according to Article of Agreement I(vi), is
duration and lessen the degree of disequilibrium in
balances of payments of members'. But the I.M.F. h
only in regard to certain (not all) members in deficit,
to bring about adjustments of chronic surplus countri
Cohen, op. cit. p. 114. 2 Bernstein, op. cit. p. 6.

3 Alexandre Kafka, 'The International Monetary Fund: reform without reconstruction?', in
Essays in International Finance, I 8, October 1976, p. 15. See also Cohen, op. cit. p. 133.
4 Kafka, loc. cit. p. I8.
the voting. Moreover, the I.M.F. is unlikely to con

deficits, yet can and does penalise non-complia
economic policy conditions imposed upon L.D.C
cancelling credit.1 The Interim Committee agreed
'graduated pressures to be applied to countries in l
imbalance, whether surplus or deficit', but fail
specific forms these might take.2
Even when it takes these very modest steps,
introduce countermeasures or actions that greatly d
established for L.D.C.s. Any gain from a larg
allocations has been neutralised by raising interest
conditions.3 While the joint World Bank-I.M.F
mittee seemed to be an L.D.C. success in link
monetary reforms with the economic developmen
1978 joint review found that this deliberati
disappointing in its inability to produce concr
results.4 It should come as no surprise, then, th
Arusha Initiative' called for a United Nations Conference on Inter-
national Money and Finance to 'provide a universal, democratic

legitimate forum for the negotiation of a new monetary system -
moreover, which can be open to public scrutiny'.5
'Ultimately', one observer comments, 'the role of the Fund
depend on what its members want it to be.'6 As the above an
shows, the L.D.C.s, especially the least powerful, will only margina
participate in determining the future of the I.M.F. The we
industrialised powers that dominate the Fund decide its political as
as its economic philosophies and practices. Worthwhile reform
come about only when the major market-economy nations per
that these are desirable.
THE CONSEQUENCES OF WESTERN CONTROL
An examination of I.M.F. activities in just one African nation r

the need for such change. Mineral-rich Zaire has worked w
I.M.F. since 1975, creating eight stabilisation programmes in
I977, I979, 1981, 1983, I984, 1985, and 1986. The country's p
debt has been rescheduled by the Paris Club seven times between
1 Parkinson, loc. cit. p. 38; and Robert S. Browne, 'Conditionality: a new

colonialism?', in Africa Report, 29, 5, September-October I984, p. 133.
2 Cohen, op. cit. pp. 117 and I23. 3 Ibid. p. I32.
4 'Background Notes on the IMF', p. io6. See also Cohen, op. cit. p. I50.
5 'The Arusha Initiative', p. 17. 6 Bernstein, op. cit. p. 8.
THE I.M.F. IN AFRICA 42 I
and I987. Yet President Mobutu Sese Seko's latest

reform are earning him accolades from western
and multilateral institutions.1 The history and a
attempts to explain why.
Foreign commercial banks and corporations ro
boom in Zaire during I973 and 1974, when the h
accounted for about two-thirds of all the foreign e
the price of copper and other commodities collap
and food prices went up dramatically the coun
debt began its dramatic climb from $1,750 milli
million in I977, and to nearly $5,000 million as t
The ruling elite had neither the will nor the ability
retrenchment - nor to distribute the cuts equi
estimated 27 million inhabitants, 75 per cent of wh
be starving or malnourished.2
Analysis of this crisis was crucial to the judge
I.M.F. and all western lenders, and permits u
inadequacies of the Fund's non-systemic appr
countries. The complexity of the situation in Zaire
There were many reasons for the crisis: the dramatic fa

commodity prices; the closure of the Benguela railroad
war in 1975-1976; the disastrous economic effects of th
(I973-I975); rising oil costs; and a world recession
compounded by the Shaba invasions in 1977 and I97
factors were, however, they are far from the whole story
were made far worse by other factors: massive and
borrowing when revenues were high, rampant c
mismanagement, grandiose and unproductive develop
the Inga-Shaba powerline and the Maluku steel mill, the
of agriculture and the transportation and productive in
of understanding and concern about the rapidly dete
Mobutu and his associates.3
Weighing these factors with the needed precision requires infor-

mation, honesty, and some brilliance. Although the I.M.F. and other
western institutional planners claim that they have been able to make
the correct diagnosis, the leaders of Zaire have managed not to
implement their prescribed remedies.
1 Cf. Thomas M. Callaghy, 'The Ritual Dance of the Debt Game', in Africa Report, 29, 5,
September-October 1984, pp. 22-5.
2 Guy Gran, Development by People: citizen construction of a just world (New York, I983), pp. I28
and I30.
3 Callaghy, loc. cit. p. 22.
Mobutu and those around him benefiting

developed a curious relationship with the I.
western governments, and the private internat
elite need their financial support, but cann
required adjustments. Implementing the bur
anded would undermine the very basis of their
free use of, the state's resources. Mobutu and h
insatiable desire for revenue and view state funds as their own assets.
Extortion, confiscation, bribery, and smuggling are the means used to
enrich the few:1
As a result, Mobutu and his ruling group use their control of the state
apparatus to sabotage major and long-lasting change, while manipulating the
external actors' partially competing interests and fears about the consequences
of a collapse of the regime to fend off effective and sustained cooperation
between them.. .Thus far, Zaire's rulers have adroitly blocked almost all
efforts by international lenders to control their financial practices.2
Zaire fell into arrears by the end of I975, but the commercial
institutions, led by Citibank, cautiously avoided any moratorium.3 By
March 1976, Zaire reached its first stabilisation agreement with the
I.M.F., whereby in exchange for a loan of S.D.R. 40.96 (U.S. $47.10)
million and its 'good housekeeping seal' to allay the fears of
international banks, certain macro-economic targets would be reached
by the end of I976. The I.M.F. prescription called for a 42 per cent
devaluation, a lid on imports, cuts in the cost of government, changes
in investment priorities, and a price policy to favour agriculture.4 What
actually happened was that the overall budget deficit, targeted at U.S.
$69 million, reached $360 million; debt-payment arrears, supposed to
fall by $70 million, rose by more than that; while inflation - hitting the
impoverished majority most - was rampant. But since some de-
nationalisation- measures were announced and the currency was
devalued, the I.M.F. authorities released the credit.
Although the benefits of the first two stabilisation plans were quite
meagre, Mobutu got his needed international show of support, and his
Guy Gran, 'An Introduction to Zaire's Permanent Development Crisis, in Gran (ed.), Zaire:
the political economy of underdevelopment (New York, 1979), p. I 3: the average yearly income of 2,350
top-ranking Zairians is more than $io,ooo, while the majority of the 27 million population earn
only $25-50; See also Nzongola-Ntalaja, 'Crisis and Change in Zaire, 1960-I985, in Nzongola-
Ntalaja (ed.), The Crisis in Zaire: myths and realities (Trenton, N.J., I986), p. 4.
3 Guy Gran, 'Zaire 1978: the ethical and intellectual backruptcy of the world system', in Africa
Today (Denver), 25, 4, 1978, p. I9.
4 Crawford, Young and Thomas Turner, The Rise and Decline of the Zairian State (Madison,
I985), PP. 379-82; and Gran (ed.), Zaire, p. i8.
potential for rule continued. In order to get bet

I.M.F. and the World Bank made arrangements
'experts' to be given key positions in the Ban
Ministry, the Customs Office, and Planning. Hen
December by Erwin Blumenthal, a retired Ge
who imposed very strict foreign-exchange quo
and exchange facilities to firms that belonged
closest collaborators. But the success of their maneouvres and counter-
measures revealed the depth of elite control and corruption. After
Blumenthal's departure in 1979, the I.M.F. staff carefully avoided
political 'hot spots' to keep the level of harassment manageable,
particularly from the presidency and the military.'
As Zaire continued during 1982 to miss the required public and
private debt-service payments, its relationship with the I.M.F.
collapsed - officially, if only temporarily - and Mobutu declared 1983
as 'the year of strictness in management'. Testing and fencing were
eventually followed by an informal agreement in August 1983, and the
following month the Government devalued the zafre by 77.5 per cent.
The impact was immediately apparent: the cost of fuel and other
essential items rose by 200 to 300 per cent in three months - a sack of
maize flour, a basic food, more than doubled - while wages increased
by only 20 per cent. In December 1983, a formal agreement was signed
providing further credit.
Some changes occurred: a number of subsidies to parastatals were
eliminated, various price controls were liberalised, and inflation
appeared to be down for the moment. Whether the increased available
domestic currency and foreign exchange, as well as the somewhat
loosened state controls, will translate into more productive economic
activity is still to be seen. Given the record of the elite in the past, such
mechanisms are unlikely to be applied in any consistent manner over
time. Moreover, the I.M.F. performance criteria and strategy may be
inappropriate, let alone limited, for real development.2
Let us now focus on the effects of elite rule on the general population,
and on the I.M.F.'s analytical shortcomings and policy assumptions.
1 Callaghy, loc. cit. pp. 23-4. Cf. 'Erwin Blumenthal is Zaire's Last Hope', in Euromoney
(London), February I979, pp. 9-I . For more complete descriptions and comments on this series
of Zaire-I.M.F. dealings, see Gran, Development by People, pp. 130-4; Young, op. cit. pp. 383-4;
and Peter Komer et al., 'Zaire: the work of the cleptocrats and the impotence of the IMF', in The
IMF and the Dept Crisis: a guide to the third world's dilemma (London, 1986), pp. 97-105. According
to 'How the IMF Works', in Kojm (ed.) op. cit. p. 96, the team was first offered briefcases full
of money; later, I.M.F. officials were threatened with sub-machine guns.
MANIPULATORS AND MANIPULATED
Mobutu came to power with western assistan

and with the guidance of European mining inter
and the I.M.F., locked Zaire into an export-le
President's dependence on international finance
the growth of local capital, while export taxes p
class to thrive.1 In I977, the Presidential dotation
annual national budget. As one observer noted
Mobutu, 2nd or 3rd richest man in the world, is proba
the annals of crime. You would never know it from I
of his economy.2
The regime has found a variety of means by

underdeveloped economy - and to keep it that
I6,ooo hectares, some of the best for growing
coffee, and cocoa, was nationalised for the P
followed by a further 22 in order to create Cultu
(C.E.L.Z.A.), jointly owned by Mobutu and hi
ceded 51 per cent back to the former owners in
that many Zairians are either malnourished
agricultural lands are used commercially to m
elite needs.3 It is especially in the outward t
farmer's 'sale' to the tax levied on exports, that t
from its bureaucratic powers. The regime effecti
and producer rights, exchange rates, movemen
and land tenure to its own advantage. Price c
effective mechanisms in transferring wealth from
elite and at the same time stagnating agricultu
The extreme difference between rural and
product and income per capita indicates that a
occurring, and that the modern sector - mine
facturing, and government - is parasitic. The am
into a farmer's product is far more than is repr
can buy. The market is dominated by a few weal
the regime's Offices agricoles are notorious for th
and inefficiencies.4 Yet many people do not h
protein is scarce for the majority.
The annual agricultural growth rate per capita
1 Gran, Development by People, pp. 127-8. 2 Ibid. p. I38.
3 Young, op. cit. pp. 179-82; and Gran, 'Zaire 1978', pp. 11-12.
4 Gran, (ed.), Zaire, pp. 3-4.
425
cent from I954-70.1 The system created by th

West has engineered this result: both interest gr
an export-dominated economy, and mineral-ri
to serve their purposes. Scarce attention has b
agriculture because the modern sector is con
national links to use resources and distribute sur
exchanges so that value flows out of Zaire,
privileged groups who import expensive cons
been disproportionate capital investment in Za
because the western multinational corporatio
pressure on the Government to modernise t
facilities to a degree far beyond its financial cap
society.2
By locking into exports, the Mobutu regime has been tied to the West,
which can buy minerals only at its rate of growth. Although Zaire
could put such profits into other sectors to diversify and meet social
needs, the world system provides incentives and opportunities for the
ruling group to put them back into mining expansion, into govern-
mental payrolls, and into Swiss bank accounts.3 Placing invest-
ments in an industry that is capital- rather than labour-intensive
continues to increase the already large urban unemployment. Although
Zaire is the world's seventh-ranking copper producer, the industry
contributes a mere 6 per cent of wage employment, albeit 45-50 per
cent of tax revenues and 80-85 per cent of the value of all exports.4
Commenting on the regime's direct control of employment and wages,
the World Bank reported in i974 that policies in Zaire have
discouraged the growth of industries based on local raw materials...and have
resulted in an industry which may be financially profitable but has the
following pitfalls: (a) high import dependency; (b) high capital intensity; and
(c) large excess capacity.5
Agriculture made no overall gains in the I 970s, which is not

surprising since no significant investments were made in rural
development: of the Agriculture Department's 1976 budget, only 9 per
cent flowed to regional bureaux. By neglect, confiscation, and
corruption, the ruling elite has blocked growth in the rural sector,
thereby preventing the vast majority of the population from securing
1 Gran, 'Zaire 1978', p. 7.

2 GhifemJ. Katwala, 'Export-led Growth: the copper sector', in Gran (ed.), Zaire, pp. 130-4;
also Gran's introduction, pp. 7-8.
3' Gran, Development by People, p. 28.
4 Gran (ed.), Zaire, pp. 8-9. 5 Ibid. p. Io.
enough and proper nourishment.1 The Zairianisati

the mid-Ig70s severely damaged rural trade, whi
system has been structured against the peasant,
lacking. The network of roads is insufficient and man
condition; tools are scarce and expensive; hum
underemployed. Under-funded extension agents fall
by regional authorities and have little impact. Th
controls on producer and consumer prices discoura
is levied for the private profit of political authorities
absent. Production stagnates, and people leave for
The use of corruption as a central means of pol
hardly be exaggerated. No economic reforms will be
major changes in the administrative system:
In a state-dominated society, the public bureaucracy is

through which public policy is formulated and implem
public pronouncements are contradicted by the daily pr
corruption.3
What the Fund and western banks often ignore in Zaire are the ruling
elite's 'magic tricks' performed through the bureaucracy. Former
heads of public agencies whose corrupt practices have received too
much publicity find themselves in new positions of power: as soon as
various leaks are plugged, new ones appear 'upstream'.4 The elite have
mastered the necessary manoeuvres, for example, to avoid official
accounting for Zaire's diamonds and much of its coffee trade. In
appearance, of course, the Government responds to western demands
for reform, notably by the Programme de relance agricole in January 1978
and the Programme de relance economique, I979-8i, described by one
commentator as little more than shopping lists aimed at foreign
donors.5
The result of a corrupt and export-dominated modern sector is a
disarticulated economy in which the various sectors do not face each
other as relative equals whose growths are mutually stimulated. The
primary stimulation comes from abroad, and the links between foreign
1 See Ciamala Kanda, 'Elements de blocage du developpement rural au Zaire (Cas Luba du
Kasai)', in Cahiers economiques et sociaux (Kinshasa), xv, 3 September 1978, pp. 334-71.
2 Financial Times (London), g July I985, quoted by Nzongola-Ntalaja, loc. cit. pp. 3-4 and 9;
Africa South of the Sahara (London, I987), p. I074; Gran, Development by People, p. I29; and 'Zaire
I978', p. 10.
3 David J. Gould, Bureaucratic Corruption and Underdevelopment in the Third World: the case of Zaire
(New York), 1980), p. xiii.
4 Callaghy, loc. cit. p. 26. See also Gould, op. cit. pp. 93- 4.
5 Gran, Development by People, pp. I28-9.
capital and the central regime poses a fundament

investment seeks the greatest profit, finds it in the
and leaves the development of other resources, as w
the Government. How are the tremendous agric
education needs of the population to be met? At
not more than 10 per cent of Zaire's investment
only averages 7-8 per cent of the gross domestic pr
Only assistance that provides for the interests
the vast majority of Zairians will be effective in th
necessary development programmes be impl
political realities of Zaire today? As long as Mo
reign, probably not. They have proved too adept
bureaucracy and economic controls. Their p
disenfranchisement, and any significant attempts
tion will probably be quashed. Furthermore, if
cannot produce food in quantities and at prices a
Zairians, more external aid alone will not change th
Thus, since 'Mobutu's ability to control Zaire d
on the existence of adequate, but not necessarily un
sufficient financial " slack "',4 the interests of the
best be served in the long run only when frien
banks, and international organisations stop giving
'slack'.
TRAPS OF THE WESTERN MIND
The above examination of Zairian problems

shortcoming of the I.M.F.'s approach to economic
analysts have watched Mobutu perform his 'magic t
funds to agriculture on paper, for example,
understood how the underdevelopment of the rura
linked to the export-dominated economy, an
significantly reformed in isolation.5 Instead, the n
Directors of the I.M.F. have been led to believe
crisis largely comes from factors beyond Mo
emphasising terms-of-trade shifts, transport de
invasions, which deserve some attention, the
essential issues of fiscal expansion, foreign exchang
1 Gran (ed.), Zaire, pp. 10-I I. 2 Gran, Development by P
3 Gran, 'Zaire 1978', p. i6. 4 Callaghy, loc. cit. p. 26.
5 Gran (ed.), Zaire, p. 7.
corruption, invalid statistics, and illusionary budg

isms are telling: corruption becomes 'mismanagem
market speculation and rip-offs suggest the need
cost-price relations'. It is never stated unequivocably
private domain of the ruling elite.1
Beyond this non-systemic approach, the I.M.F. staff
questionable value, usually based on government repo
not include economic activities beneficial to the ru
'kept off the books'. Even so, how does the Fund
indicators? It is clear from some of the 'leaks' of cou
the judgemental standards of the I.M.F. may be legit
The staff do no ask, for example, how budgetary los
compensatory external aid, or whether mineral reven
an amount at all relevant to major financial shortfall
external economic reformers must be able to face ' head on' the need to
identify the extent and location of the moneys chat are being syphoned
off by the unproductive elite.
Even if these flaws were corrected, the I.M.F. must also face the
limits of its neo-classical economic assumptions. Most western analysts
make use of theories that are suited for 'benevolent', if not perfect,
environments, and the social contexts of production, and of processes
and relationships, rarely surface in their reports. As indicated above,
Zairian institutions and the people in control are hardly 'benevolent'.
The 'trickle down' theory of development, still in effect if no longer
believed, has been recognised as impractical in Zaire even by the U.S.
Agency for International Development - in fact, A.I.D. admitted not
knowing what strategy would work in that country.3
The concentration on demand-side factors and control by the I.M.F.
is ill-suited to L.D.C.s in general, and inadequately addresses the needs
of the people significantly affected by abstract economic concepts and
language. The stabilisation policies used in Zaire, and elsewhere in the
Third World, include devaluing the currency to encourage exports,
relaxing exchange controls, tightening private credit, reducing price
controls to encourage investment, placing ceilings on wage increases
in the public sector, and restraining the budget by other means as well,
transferring parastatals to the private sector, lowering taxation, and
raising productivity.4 These policies are a result of the belief that
1 Gran, Development by People, p. I37.
2 Gran, 'Zaire 1978', p. 6. 3 Ibid. p. 13.
4 Komer et al., 'The Instruments of the " Financial Policeman ": meaning and conten
stabilisation Programmes', in The IMF and the Debt Crisis, pp. 54-6; and Gran, Develop
People, p. 126.
expansive demand policies are the principle cau

country's economic crisis.
I.M.F. analysts see government spending far in
leading to budget deficits and inflation; they se
exchange rates to reflect internal inflation, lea
currencies; they see an inability to maintain a balan
and exports in the face of rising import prices. Bu
not put into the unbalanced equation the fact t
countries raised the prices of manufacturing goods
of Africa's exports, and increased interest rates.1 No
grips with the realities of the African situation be
market bias does not adequately discriminate as
would function best, given a society's overall ne
Bank and the I.M.F. prefer exogenous to endoge
and by now it should be clear that in the case of Zai
not only creates undesirable dependency but also
the ruling elite, both to the detriment of a poor p
Moreover, the most crucial weakness of the
inadequate consideration of the fact that most s
nations do not have the capacity to make the pre
they have limited economic flexibility and short-te
price incentives, low and recently falling levels of
urban real wages, inadequate technical and admin
within the governmental economic policy-makin
fragile political support. There can be little roo
adjustments when a nation's exports are a limited n
ties that are generally not consumed locally, and w
local consumption cannot be deflected into the ex
Recent world economic events make it difficult for the I.M.F. to
distinguish between the need for balance-of-payments and development
finance. Dramatic oil price increases and extended recessions are
longer-term shocks to the balance-of-payments than normal. It is no
longer clear how much of today's financing requirements should be
regarded as needed for continuing development and how much as
temporary stabilisers. The terms of trade of African countries exporting
primary products were worse in I 982 than at any time since
independence.3 The I.M.F. has enlarged its perspective for some
countries in recent years by extending loans beyond the short term, but
1 Browne, loc. cit. p. I6.
2 G. K. Helleiner, 'The IMF and Africa in the I980os', in Essays in International Finance, I52,July
I983, pp. I8-I9. 3 Ibid. pp. 3 and 5.
in most cases the structural adjustment programm

the World Bank still emphasise immediate pro
When urban unemployment is high and maize u
areas for up to six months at a time, when the pric
flour -just enough to feed a family for a month -
his entire monthly wage, can this be the time for
adjustments of the kind and degree required by
Too exclusive a focus on restoring the balance-of
rium distorts the productive system, in the c
satisfying external demand, rather than meeting
self-reliant development. Cuts in public exp
education and health, have lasting economic and
The unemployment effects of short-term polici
social cohesion and an insecure environment for th
needed for development.2
Part of the I.M.F.'s inadequacies lies in its soci
educated neo-classical economists work in teams, s
produced by the governments under review
agencies. Only rarely do they consult indep
journalistic analyses. The I.M.F.'s library is inade
wonder that the average 'country paper' contain
staff are changed every two to four years, so there
to build-up country expertise:3 their 'field' wor
limited to the capital city, and largely spent with
government. There is little investigation of the
developmental recommendations, and no account
term assessment, a requirement central to the pro
in Zaire. Very few of the 1,500 or so I.M.F. profes
lived - in Africa; they have limited experience
supply-side policies; and though they can rely
larger World Bank staff of some 2,700 for such p
always do so.4
Wealthy elites have fared better than the majorit
under many I.M.F.-supported stabilisation program
cant portions of the poor have suffered dispr
1 Gran, 'Zaire 1978', p. 9.

2 Director-General of the International Labour Organisation
Situation on Employment and Human Conditions in Developing Co
3 Gran, Development by People, pp. I35-6.
4 Helleiner, loc. cit. pp. 8-9 and 22.
6 Richard E. Feinberg, 'The Stand-by Arrangements of the
Woodstock Theological Center, Georgetown University, i980.
THE I.M.F. IN AFRICA 43I
standard 'insider' reaction to this criticism is

nature of the Fund:
An international institution such as the Fund cannot take upon itself the role
of dictating social and political objectives to sovereign governments. The
Fund's role is to say: 'In view of the external financial resources available to
you, the objective of restoring a viable balance of payments position within a
reasonable period implies that you must limit your domestic consumption,
increase your domestic savings, and expand your exports. If you are resolved
to take measures that will make it possible to achieve these objectives, we will
help you; it is up to you, within the framework of macro-economic parameters
negotiated by mutual agreement, to arrange your own social and political
priorities.'l
The distinction here between economics and politics is false. The

I.M.F. often aggressively asserts its power to require sovereign
governments to make economic adjustments, and by doing so at least
indirectly dictates social and political objectives. Unemployment is
related closely to money supply and investment; food subsidies may be
what a particular regime is willing to cut in government expenditures.
Whether or not the I.M.F. has such an intent, its policies have serious
political effects.
Moreover, in the I98I-3 period, I.M.F. behaviour towards L.D.C.s
appeared as acts of political self-assertion. The Fund's norm is to
distinguish between permanent and temporary changes in balance-of-
payments problems, and to provide liberal credit for the latter and/or
impose adjustment conditions for the former. The Fund thereby tries to
avoid the argument that 'demand shock' policies are unfair when
external conditions are responsible for severe balance-of-payments
disequilibria. The recession of the early I98os was a temporary, crisis,
yet the Fund imposed high conditions.2
If sufficiently concerned and determined, the I.M.F. could overcome
many of its institutional weaknesses. It has already begun to adapt its
activities to problems beyond immediate balance-of-payments prob-
lems, but it needs to go further. It should co-ordinate more with the
World Bank and tackle the long-term implications of the present world-
system disequilibria.3 This will require extended unconditional 'facili-
ties', as they are called, a significant quota increase together with
voting reform, provision for contingencies in the timing of adjustment
programmes along with medium-term facilities, substantial capital
1 Jacques de Larosiere, 'Does the Fund Impose Austerity?', in IMF Survey, 1984.
2 Helleiner, loc. cit. p. i6.
3 Miriam Camps and Catherine Gwin, Collective Management: the reform of global economic
organizations (New York), 1981), p. 233.
contributions to major public aid agencies, a

political realities.l
To achieve a long-term correction of today's f
disequilibria requires policies of greater s
opportunities. Zaire is the model not to foll
which cannot be shared by the vast majority a
development should not be introduced in
resources and technology should be used as
foreign dependence should be minimised.2
beyond structures to examine processes. Blunt
foiled, as they have been in Zaire; fine tuning
in key economic sectors - agriculture, for exam
specific bottlenecks. Sensitive, experienced m
are needed.3 Their country reports, more
knowledge - how else can citizens monitor thei
Given world economic expansion, the I.M.
credits have been unduly limited. They have
the value of trade, for instance. From 197 I-8 I,
cent and exports by 183 per cent in the 32 leas
which 20 are in tropical Africa). Imports gre
399 per cent in countries with income per capi
year. Since I97I, the maximum annual acces
I.M.F. credit has grown by only 120 per cen
system provides numerous precedents for char
on credit to the poorest members. The equity i
the Trust Fund and the Subsidy Account of
the practices of the International Development
scheme in the Lome Convention, and the bilate
of-payments assistance. Interest-subsidy ar
improved and systematised, rather than re
whims of voluntary donors.5
The Fund is not alone in the realm of develop
is it powerful in any absolute sense in the
monetary system.6 There has been a substan
1 E.I.M. Mtei, 'Africa and the IMF: an evolving relation

September-October 1984, p. 21; and Parkinson, loc. cit. pp. 28
pp. 39-41 and 45.
2 Mahbub ul Haq, The Poverty Curtain (New York, 1976), p
Zaire, pp. 21-2.
3 Helleiner, loc. cit. pp. 15 and 20. 4 Gran, Developmen
5 Helleiner, loc. cit. pp. 12 and 14.
6 See 'The Terra Nova Statement', p. 30.
433
the value of Fund quotas in real terms.1 Also, sig

long-term lending by the I.M.F. might not con
character of its resources.2 Private financial instit
the principal source of balance-of-payments fina
But still the Fund has recently established itsel
agency on the international scene. Moreover,
L.D.C.s is considerable, especially as the 'lender o
whose manufacturing capabilities make them
ments. For low-income countries, the Fund o
'first' or 'only resort'.4 Given the existing weste
I.M.F., this situation is unlikely to change m
future. Only transformed western attitudes a
remake the Fund.5 For those whose human ne
to be neglected and violated due to I.M.F. activ
promising.
World Economic Outlook, p. 25. Total Fund quotas fell from 12 per cent of world imports in the
early I960s to 4 per cent in the I98os after an increase. The decline is also dramatic in view of the
fact that the sum of the current account imbalance in I980 of a group comprising the majority
of I.M.F. member-states was ten times the level recorded during the early I96os, while quotas, by
ways of contrast, increased by a factor of less than four.
2 'Towards the New International Economic Order', p. 27.
3 World Economic Outlook, p. 24.
4 Sutton, loc. cit. p. 12.
5 Several African governments continue to make efforts to move Commonwealth Finance
Ministers towards an L.D.C. perspective on the need for the I.M.F. to be reformed, particularly
as regards its structure and style of management. At present, for example, attempts are being
made to ensure that member-state 'negotiations' with the Fund are more meaningful, because as
regards Africa these often seem to be 'completed' in Washington before the I.M.F. mission
arrives in the host country.

IMF and Zaire

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IMF and Zaire

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The I.M.F.

in Africa: Unnecessary and Undesirable Western Restraints on Development

The L.M.F. in Africa:

The International Monetary Fund has established itself as the mo

* Lawyer, Washington, D.C.

several years for 'assistance'. Most are not new

THE ORGANISATION OF POWER AT THE I.M.F.

Designed by two major post-World War

1 Ekwow Spio-Garbach, 'A Strategy for Africa's Financial M

Directors, who reflect national economic power

Federal Republic of Germany, France, and Japan -

The Group of Ten exerts control over important I.M.F. decisions by

1 Brett, loc. cit. p. 28.

they can be vetoed by either the Unite

On the whole, the Group of 24 - eight m

The IMF world is dominated by middle-aged economists.. .whose personalities

Directors usually learn about loan proposals at polite, in

Within anyone's memory, these 22 men (the Executive

Legally, the Executive Directors do not 'repr

Another director wrapped up the feeling of his colleagues who represent a

the IMF is not objective in the application of its

From the L.D.C. perspective, the problem with the

The particular loan facility to which El Salavador was applying ha

These arguments shocked this decision-making body of

1 'The Arusha Initiative', in Development Dialogue, 2, I980, p. 14.

Financing Facility. The loan was opposed by t

1 Ibid. pp. 45-7.

One man stands alone among the representatives of

As in other international organisations, national interests define

grant major powers to the Executive Directors

How committed de Larosiere was to the L.D.C.s is difficult to know,

I would argue that the successful containment of differing views within

while we continue to stress the importance of

Critics would query the meaning of'systemat

Ph.D. in economics from Vanderbilt University.1 The

The Fund staff plays an important role in structuring and negotiating

The letter of intent, if accepted by the Executive Direc

CONDITIONALITY: POLICY AND PRACTICE

Conditionality continues to be widely criticis

The Fund's practice illustrates that the conditionality principle is not

applied only where and to the extent required

In helping members to devise adjustment progra

In practice, the Fund disregards what it recogn

As long as the international environment remains c

Moderate critics also look to the Fund Arti

1 Dell, op. cit. pp. i6 and 28.

imposed measures. The purposes of the Fund ac

To facilitate the expansion and balanced growth of in

To give confidence to members by making the general

In his interpretation of these purposes, Tony Killick highlights an

Bahram Nowzad, editor of an I.M.F.-World Bank publication,

adjustment programmes, and make a more conscious att

Related to the selection of these policies is another ser

Tanzania is not prepared to devalue its currency just bec

My Government is not prepared to give up our national endeavor to provide

The IMF... needs to be made really international, and really an instrument of

PROBLEMS FACING REFORM

A serious attempt from within to reshap

1 Ibid. pp. 21 and 23. See also Sidney Dell, 'Stabilization: th

to direct more of the social savings afforded b

The Outline of Reform stated that in the light of the

The stalemate resulted in principles that had no pra

Cohen, op. cit. p. 114. 2 Bernstein, op. cit. p. 6.