- There is no two positive way about it. The debt cancellation is an indicator to us all that the government of Malawi's fiscal prudence is beyond reproach. The cancellation, according to all that are excited with it, is a development that calls for a triumphant celebration. No crime with that. However, there are a great deal of reservations attached to these celebrations.
"To me, the country's soul has been compromised," says Malawian columnist Gregory Gondwe. "I think the debt relief is both the beginning of an end and an end of the beginning. It is a vicious cycle that will really need a prudent, brave and more able government to break this cycle than the government of President Bingu wa Mutharika and his Financial Magician Goodall Gondwe.
Country folks must know that this euphoria over the cancellation is just some passing fancy that does not even mean we as a country will never get into debts again.
Just a few days after the debt cancellation and the country reaching what the International Monetary Fund (IMF) and its clientele have decided to call 'Completion Point' Malawi started getting or will keep plunging itself into more debts.
Now, this is where the talk of a cycle is now coming. Once we would have accumulated more staggering debts in a few years to come as was the case before the cancellation, then we will again start talking of lobbying for another write-off where we would also have completed another revolution.
But I thought the purpose of why an institution or an individual seek financial assistance in terms of loans, funds and all, is to improve life? But are we going to have the lives of all those in dire need of government interventions that would liberate them from poverty traps realise this?
As usual all politicians will say this is possible, which I choose to disagree. While the G8 and other international financial lending institutions keep on prescribing us the right linctuses to rid us of our persistent poverty flu and coughs.
It all started in December 2000 when Malawi had some of its foreign debt repayment suspended for it reached 'Decision Point' under Highly Indebted Poor Countries (HIPC) initiative by merely preparing a poverty reduction strategy which goes together with an IMF chaperoned financial programme that guides a country to reach a completion point.
In 2004, President Mutharika took up to the 'IMF's Staff Monitored Programme' to demonstrate his government's capabilities to adhere to firm fiscal discipline in contrast to his predecessor's economic malfunctions, which led to failure to reach a completion point that was supposed to be reached in 2003.
With the debt cancellation, the good news is that Malawi's foreign debts have been cut by over 90 percent from US$ 2.9 billion to about US$ 400 million which represents debts by other institutions that do not participate in the G8 debt cancellation programme. Government in turn will be saving an average US$ 110 Million every year for the next 20 years.
As a gesture of happiness, President Mutharika's DPP party organised marches of celebrations in our cities but once again the people were used to dance to dirges of a nation that has had its soul almost declared dead.
Malawi is dead and only seen to be moving its fingers about for no other reason other than the economic supporting machine, administered by the IMF and company. The talk of economic reform must be designed to uplift the common Malawian from the dregs of poverty and not to answer to the dictates of foreign institutions because they have neo-colonised us.
IMF or any other institution must not be the ones telling us how to run the money that we borrow from them but they do because they are themselves infallible according to a book called 'Globalisation and its Discontents' by Joseph Stiglitz.
Joseph Stiglitz is not just someone unknown. He is currently Professor of Finance and Economics at Columbia University. He won the Nobel Prize of Economics in 2001. Before this he was Chairman of US President Bill Clinton's Council of Economic Advisors then left the White House for World Bank where he was Chief Economist until January 2000.
He says the IMF is not particularly interested in hearing the thoughts of its 'client countries' on such topics as development strategy or fiscal austerity. All too often, the Fund's approach to developing countries he says has had the feel of a colonial ruler.
Professor Stiglitz says when he took up a job at the World Bank he saw his task three fold: thinking through what strategies might be most effective in promoting growth and reducing poverty; working with governments in the developing countries to put these strategies in place; and doing everything he could within the developed countries to advance the interests and concerns of the developing world, whether it was pushing for opening up their markets or providing more effective assistance.
"I knew the tasks were difficult, but I never dreamed that one of the major obstacles the developing countries faced was man-made, totally unnecessary and lay right across the street-at my 'sister' institution, the IMF," he says.
The IMF is particularly concerned about inflation and if follows that countries, like Malawi that time, whose governments spend more than they take in taxes and foreign aid often will face inflation, especially if they finance their deficits by printing money.
To most economists, inflation is not so much an end in itself, but a means to an end. But the IMF often seems to confuse means with ends, thereby losing sight of what is ultimately of concern.
Professor Stiglitz says if a country does not come up to certain minimum standards the IMF suspends assistance; and typically, when it does, so do other donors understandably. To him it is hard for a moderate-sized institution like IMF to know a great deal about every economy in the world.
He says IMF has made a number of mistakes by imposing its policies on countries before wondering how an organisation with such talented (and high paid) government bureaucrats make so many mistakes?
The Professor says IMF replaces economic science with ideologies, ideologies that give clear directions, if not always guidance that works, and ideologies that are broadly consonant with the interests of the financial community, even if, when they fail to work, these interests themselves are not well served.
One important distinction between ideology and science is that science recognises the limitations on what one knows. There is always uncertainty. By contrast, the IMF never likes to discuss the uncertainties associated with the policies that it recommends, but rather, likes to project an image of being infallible.
This posture and mindset makes it difficult for it to learn from past mistakes - how can it learn from those mistakes if it can't admit them? While many organisations would like outsiders to believe that they are indeed infallible, the problem with the IMF is that it often acts as if it almost believes in its infallibility.
In January 2002, the IMF chalked up one more failure to its credit - Argentina. Part of the reason is its insistence once again on contradictory fiscal policy.
He cites IMF's total failures in East Asia, Korea and Thailand, Indonesia which it repeatedly tried its large bailouts strategy and witnessed the same failure in Russia, Brazil. But Malaysia and China who chose not to have IMF programmes succeeded tremendously.
The question now should be how to we avoid incurring debts and let alone from IMF?"
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