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Mr. Saleh M. Nsouli and Justin B. Zulu

Abstract

This paper reviews recent experience of African countries in the design and implementation of adjustment programs supported by use of Fund resources.

PAULA DE MASI and HENRI LORIE

Changes in military expenditure as a share of gross domestic product (MIL/GDP) and of total expenditure (MIL/EX) during IMF-supported programs are examined for two subsamples, broadly divided according to fiscal tightening and fiscal accommodation. Under fiscal tightening, the evidence suggests that MIL/GDP decreases during Fund-supported programs, but that MIL/EX increases, revealing resilience to budgetary adjustments. Under fiscal accommodation, as total government expenditure tends to increase, so does military expenditure; the ratio MIL/EX declines, however, because fewer additional resources are allocated to the military.

Mr. Saleh M. Nsouli and Justin B. Zulu

Abstract

This paper reviews recent experience of African countries in the design and implementation of adjustment programs supported by use of Fund resources.1 The aggregate analysis covers primarily 1980 and 1981, while the case studies include results through the end of 1983. The paper is divided into seven parts. The first part outlines the economic background leading to the emergence or aggravation of financial imbalances in Africa before 1980. The second part reviews the role of the Fund in financing and adjustment. The third part examines the objectives of programs supported by use of Fund resources. Against this background, the fourth part analyzes the design of programs. The fifth part assesses the experience in implementing adjustment programs, with a view to determining the reasons for the difficulties that these countries encountered. The sixth part provides case studies of the recent adjustment programs of Somalia and Mali, which were supported by use of Fund resources. The conclusion summarizes the study’s main findings.

Mr. Saleh M. Nsouli and Justin B. Zulu

Abstract

In view of mounting economic and financial imbalances, a number of African countries worked closely with the Fund to design and carry out appropriate adjustment programs during 1980–81.2 At the beginning of 1980 there were 12 stand-by arrangements. The total amount approved under these arrangements was equivalent to SDR 455.2 million. Several arrangements expired and new arrangements were approved during 1980. At the beginning of 1981 there were 11 stand-by and 3 extended arrangements for a total of SDR 1.8 billion. With the increase in extended arrangements and the approval of new stand-by arrangements in 1981, the numbers of stand-by and extended arrangements in effect at the end of 1981 were 13 and 6, respectively, with the total amount committed reaching a record SDR 4.3 billion. Purchases nearly doubled in 1980 and more than doubled in 1981, reaching a record SDR 1.7 billion (Tables 2 and 3).

Mr. Saleh M. Nsouli and Justin B. Zulu

Abstract

The general objectives of adjustment programs supported by use of Fund resources are summarized in the Fund’s Articles of Agreement. These objectives include:

International Monetary Fund
This paper examines how military spending has been affected by Fund-supported programs. It looks at the changes in military expenditure as a share of gross domestic product (MIL/GDP) and of total expenditure (MIL/EX) for two subsamples of Fund-supported programs, broadly divided into fiscal tightening and fiscal accommodating. Under fiscal tightening, the evidence suggests that MIL/GDP decreases during Fund-supported programs, but that MIL/EX increases, revealing resilience to budgetary adjustments. Under fiscal accommodation, as total government expenditure tends to increase, so does military expenditure; however, the ratio MIL/EX declines, as fewer additional resources are allocated to the military.
Mr. Elie Canetti and Mr. Joshua E. Greene
This paper examines the relative importance of monetary growth and exchange rate depreciation as causes of inflation in a sample of 10 Sub-Saharan African countries. Causality tests and impulse response functions derived from vector autoregression (VAR) analysis suggest that both monetary expansion and exchange rate adjustments cause inflation in a number of these countries. However, the failure of the tests to attribute the bulk of the variance in inflation in most of the countries to either variable suggests either a problem with the statistical technique or that some other factor--perhaps structural bottlenecks or a measure of overall macroeconomic policy stance incorporating both monetary and exchange rate policy--may be even more important as a determinant of inflation in African countries.
International Monetary Fund
The paper examines the experiences of nine African countries that have introduced floating exchange rate regimes in the 1980s. The various types of market arrangements are explored, focusing on the roles of market participants. After a review of exchange rate developments under the regimes, some related concerns with respect to urban income and employment, resource allocation, and short-term instability are analyzed. In the light of this analysis, the paper suggests some policy recommendations aimed at ensuring the success of the floating regimes.
Mr. Saleh M. Nsouli and Justin B. Zulu

Abstract

Although there is general agreement on the objectives, each program is designed differently. There is no such thing as a “typical” Fund-supported adjustment program, although many articles have been written attempting to describe such programs by pointing out the commonality of objectives and instruments. The objectives and instruments, however, are limited and are clearly common to most countries. A program involves setting specific quantitative objectives and selecting the proper mix of instruments as well as deciding the degree to which each instrument will be used. In this sense, because no two countries share the same economic conditions, no two Fund-supported programs are alike. Each program addresses the specific problems of the country concerned, takes into account the macroeconomic relationships imposed by the institutional framework, and sets the quantitative targets for the instruments selected.

International Monetary Fund
This paper updates the status of implementation, impact, and costs of the Enhanced Heavily Indebted Poor Country (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI). Debt relief provided under the Initiatives has substantially alleviated debt burdens in recipient countries. Aided by continued flexibility on the part of IDA and the Fund, substantial progress has been achieved under the Initiatives since the last report, and a number of post-decision-point countries have already benefited from debt relief.