- Gerald Helleiner
- Published Date:
- March 1986
Well-informed observers have dwelled on explanations of why the economic recovery has been much more rapid in the United States and the Pacific Rim countries than in the rest of the world. They state, moreover, that it was not until a particular region was faced with serious financial difficulties that the international community began to express concern and that impassioned discussions of the foreign debt problem took place. If I am making a point of reminding you of these facts today, it is to bring home to you that we, as Africans, are aware of the realities of the world today. For this reason, when we are invited to participate in international conferences, we use the opportunity to inform the world that we are fully aware of the interests that condition international relations and the reality of the situation in the world today. For Africa, however, the situation is today quite simply a matter of survival. We have indicated our desire to exchange viewpoints with officials of the Fund in order to make them aware of our real problems; but we also, and perhaps above all, wished through the Fund staff to draw the attention of the entire international community to our situation.
So as to avoid repeating the ideas developed by previous speakers and watering down our thoughts into mere generalities, I would like to discuss a number of specific problems in the hope that Fund officials will concentrate on them and assist our countries more effectively to pinpoint the challenges.
I would like to begin by identifying measures that could, in my opinion, constitute practical and suitable solutions to Africa’s problems and that, if applied effectively, could help our continent to overcome the current crisis. The major concern of the African countries in their relations with the Fund is their access to Fund resources. At the Central Bank of West African States we feel it is essential that the cost of using these resources be studied carefully. At present the cost is in fact high, which means that any major use of Fund resources involves the risk of further damaging the debt profile of our countries. Consequently, we feel that the cost of the assistance provided by the Fund to the African countries should be reduced so as not to jeopardize efforts being made to bring the foreign debt down to more tolerable levels and to create conditions for sustained economic growth. We invite the Fund to examine this proposal, which in our view is quite feasible and could help us specifically to find a solution to some of Africa’s problems. The Fund should take appropriate measures to give the African countries greater access to its resources while establishing arrangements for subsidized interest rates through the Trust Fund or some other facility.
Second, the required pace of the adjustment programs, and related conditions imposed by the Fund on countries receiving its assistance, are, in our view, too rigorous. In establishing performance criteria, the Fund missions should from the outset pay more attention to the various implications of the adjustment programs. In this context, the rate of adjustment should be scaled down, enabling the African countries to reconcile adjustment with economic growth more satisfactorily.
Third, Africa’s difficulties result essentially from depressed world prices for its raw material exports. This means that the African countries cannot secure from these exports the resources needed to improve production. We feel it important to make World Bank and Fund staff aware of this crucial problem, which urgently requires a solution. At the same time, we would like to help the industrial countries of Europe in particular to understand better the serious consequences of this situation and the need to increase official development assistance. The industrial countries often do not recognize this need for better prices for raw material exports, not least because the African countries themselves, showing an amount of pride unwarranted in the circumstances, do not state their case for higher prices effectively. This attitude on the part of the African countries is even more difficult to justify when you consider that they have every right to demand a fair price for their output, fruit of the labor of millions of their citizens. As governors of the central banks, we face many and varied problems every day, and the staff of the World Bank and the Fund can help us find the appropriate solutions. Agriculture in Africa, whether it be based on single or diversified crops, is hampered by numerous restrictions that prevent it from effectively playing its role as the driving force in the improvement of production and economic growth. All organizations involved in marketing have become well aware of this situation and the Fund can no longer, in our view, ignore it.
Fourth, Fund officials should, in their studies, emphasize not only the need to ensure that the responsibilities and consequences of the debt problem are shared as much as possible between creditors and debtors, but also define the ways and means of achieving this objective. In this regard, we would like to see the Fund adopt a more flexible approach to the question of foreign payments arrears by making this kind of suggestion in negotiations with the creditor countries and private banks. Having become the natural intermediary between the debtors and creditors, the Fund enjoys unquestionable moral influence, and any decision that it would make to provide assistance to its poorest member countries, most of which are African, would have an undeniable positive effect.
As for the World Bank, it must increase its assistance to the countries of Africa. The special fund for Africa does, it is true, constitute a laudable initiative, but the resources currently available through this fund are still quite insufficient. Moreover, it is important to ensure that lenders do not use the creation of this facility as a pretext for rejecting the replenishment of IDA resources. The creation of this fund should not result in the elimination of other special windows, insofar as the special fund is specifically intended to assist the African countries. For this reason, we ask the President and Executive Board of the World Bank Group to refuse to consider any study submitted to them tending to credit the thesis that it is no longer necessary to develop other types of assistance from the World Group because the African countries will be benefiting amply from the resources of the special fund. Moreover, the staff of the World Bank should propose to its governing bodies that the Bank’s capital be increased. As directors of the central banks, we all know how much weight we accord to suggestions from our staffs. We base our decisions on the studies that they submit to us. We do not generally amend these studies significantly because they are usually quite relevant. Staff of the World Bank can therefore directly influence the highest decisionmaking levels there, and we invite them to speak for us before these governing bodies.
The discussions which have taken place over the past three days have also given us an opportunity to express our serious concerns regarding current relations between the World Bank and the Fund. More than ever in the past, it is important that cooperation between these two institutions be enhanced so as to make both organizations more effective. This cooperation, while mutually complementary, should not mean more conditionality. The Bank should not systematically tie structural adjustment lending to the approval of stand-by arrangements with the Fund, as these involve policy measures that are often difficult to implement. Action by these two institutions should rather be simultaneous, with one dealing with short-term problems while the other provides assistance intended to create conditions for long-term economic growth in the recipient countries. Africa will be able to overcome its current difficulties only if adjustment measures are accompanied by action to promote sustained economic growth.
Fifth, the procedures with respect to structural adjustment loans and other forms of assistance must be simplified and made more flexible and the disbursement of funds must take place more rapidly. For their part, the African countries must acknowledge the need to provide the Bank as quickly as possible with the necessary supporting documents justifying their requests for assistance. It would be unrealistic for these countries to ask for loans and at the same time to refuse to provide material proof of their need. Experience has taught me that in economics, in contrast to politics, the longer the implementation of a measure is postponed, the greater the cost and the more serious the problem that remains unsolved.