A. Tadesse Gebre-Kidan

Gerald Helleiner
Published Date:
March 1986
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At the outset, let me make a brief comment on two issues. First, when we talk to the Fund, whom exactly are we addressing? As I see it, the Fund comprises its staff, the Management, the Executive Board, the Board of Governors, and through it the international community at large. From that perspective, I think the relevance of this discussion is not intended per se for the consumption of the Fund staff. I thought this should be clarified. Second, with respect to the terms of reference of this symposium, it has been unclear whether we have to confine ourselves to operational matters and some policy matters, or whether we could extend our remarks into fundamental relationships between the Fund and African countries. In my view, the latter cannot be excluded.

It has been amply demonstrated here that a serious and fundamentally critical situation prevails in the African continent. I would like to refer to the ecological developments alluded to in passing by Mr. Williamson. I think we are in for a much more troubled period. A symposium was held on this topic in Brazzaville recently, and one of the speakers, who is among the most eminent scientists in this field, said we may be on the threshold of an era of ecological devastation. Unless the situation is reversed, the physical basis on which everything is built will be destroyed. The need for addressing this problem is urgent.

In addition, the infrastructural base and the level of skill and technology are extremely low in Africa. Because of this, our economies are fragile, our capacity to negotiate with the rest of the world is limited, and we are paying a heavy price, heavier than the rest of the developing world. The realities that we face and the balance of payments problems that we find in Africa are reflections of these problems, nothing less and nothing more. Whatever we prescribe for the continent must emanate from these circumstances. In the current situation and its prospects, many paradoxes are emerging, probably more than ten. In the face of these difficulties, structural adjustment facilities in the Bretton Woods institutions are either being scaled down or withdrawn. There is actually going to be a net outflow of resources from Africa. Direct investment is on the decrease because Africa is regarded as a high-risk area. Domestic saving is extremely low; therefore investment is extremely low, and there is no growth. In the face of the degradation of land, there is paradoxically a population explosion. What does all this mean? There have to be fundamental solutions to such serious problems that are deep seated and accentuated by such paradoxes; otherwise there is going to be a fundamental crisis.

Now, what is to be done? We have been talking about realities over and over again. In my view, there are various types of realities: realities that must be accepted, and others that must be changed. The sort of paradoxes I mentioned, superimposed on the incredibly increased difficulties that we face, can create an outcome that is easy to imagine. The realities that must be changed must be changed through an active effort to address some of the fundamental problems.

We just cannot take a passive attitude to a good number of these problems and cannot count on developments elsewhere to help us out. In fact, when it comes to adjustment measures, sometimes what is good for the rest of the world may be bad for Africa. For instance, there is now an accent on reducing inflation. One way to reduce inflation is, of course, to depress prices for our produce. That has been done and is actually further aggravating our problems. From this perspective I think certain realities must be arrested and reversed so that we can make progress. Otherwise, we are simply presiding over chaos.

At the same time, I know current international and political realities and know we cannot escape from the conclusion that these realities are not conducive to international assistance at this time. Unless we make a serious and massive effort to avert the crisis, the whole situation may be doomed.

Against this background, what can the Fund do? There are two areas for action. One is operational and has been adequately dealt with by earlier speakers; the other is more fundamental. I think there is some hope since the industrial countries accept that the international monetary system leaves much to be desired and that it will have to be reviewed. This is a good beginning.

In this context, what can the Fund do in an expanded and reformed system? I see several roles. First, the Fund should get into action. It should not ignore the smallest countries. It cannot guarantee world prosperity and peace by leaving these countries out. We have the experience in my own country. As you all know, when the League of Nations was approached by Ethiopia for assistance during the Italian invasion, the international community said Italy is more important than Ethiopia. So the League chose to forget Ethiopia’s claim and, of course, what that triggered is known to all of you. If we all belong to the same community, organically linked, then we cannot say this is more important or that can be ignored. Yet this is, unfortunately, the attitude that I now detect. There is a tendency to say the African countries should be left to their own devices; and maybe this is founded on a concept that only the fittest should survive. Basically we are not unfit; we are fit, but we need assistance. So in that respect, the Fund should be in the forefront in helping the cause of the smallest members.

Second, with respect to the role it should play vis-à-vis the poorest countries, I agree with the panelist who pointed out that we are not referring to the African countries only, but in this respect we are talking of all the least advantaged countries in the world community. As far as these small and weak countries are concerned, I think the Fund can have four roles. It can remain a monetary institution, as lender of last resort for countries that face temporary liquidity problems. Second, it can reconstitute itself to address their development financing needs in conjunction with other institutions. To this end, various schemes can be devised. For instance, from the total quota, a certain amount could be segregated for this purpose. The basic concept behind that would be that the Fund is an institution devised to ensure prosperity and better living for the whole international community. Third, the Fund can be regarded as an agency for the transfer of real resources from the rest of the world to the least advantaged members of the world community. In simple language, we can regard it as a taxman for the benefit of the smallest countries. This is a concept that transcends national boundaries, and if we all belong to the same international community, I think it is high time that we should start addressing ourselves to this kind of approach. Fourth, I think the Fund can evolve into a protector of its smallest members. It can shield them from external shocks by instituting various equalization measures and other mechanisms.

These approaches involve alternative perceptions and attitudes. If the Fund were framed on this foundation, we would have better prospects for the future. These are challenges that can be put before the international community and the Fund. I hope they will be given due consideration.

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