In a break with past policies, the International Monetary Fund (IMF) may be prepared to step in with short-term emergency measures to help poor countries face rising food and fuel prices.
IMF Director-General Dominique Strauss-Kahn indicated this on 25 February at a one-day economic summit with heads of state from the West African Economic and Monetary Union (WAEMU).
“All countries are potentially facing a situation where all of a sudden the price of oil and food may increase. Families that barely have what they need to survive are the hardest hit,” he told journalists.
“There are solutions that the IMF can bring to help find fiscal responses to these crises… to ease tense periods,” he said.
Global food prices are continuing to soar, according to the Food and Agriculture Organisation (FAO), triggering riots over the cost of living in three major cities of Burkina Faso and in Cameroon’s capital, Douala, in the past week.
International wheat prices in January 2008 were 83 percent higher than a year earlier.
The presidents of Benin, Côte d’Ivoire, Togo, Mali and Burkina Faso, and the prime ministers of Guinea Bissau and Niger, attended the one-day summit.
Short-term measures
Strauss-Kahn suggested the IMF could adopt short-term measures such as making loans available, and giving national tax and economic policy advice to soften the blow of hikes in the cost of living and help “relieve the pressure” on governments, without affecting economic stability.
He countered criticism of the IMF as a fireman which “extinguishes the fire and then drowns everything later on its way”, and defended the IMF’s role in having spurred economic growth in West Africa.
“The technical assistance the IMF has given West Africa is one of the elements that have triggered the economic take-off of these populations,” he said.
Strauss-Kahn said there was no one-size-fits-all answer to addressing food price hikes, but that “over the long term there is only one true solution, and that is economic development.”
On that front West Africa is on the right track, he said, as the economies of the WAEMU countries have been “progressing remarkably” over recent years, with economic growth rates of 4-6 percent.
The role of the IMF in West Africa has traditionally been to try to spur economic growth in developing countries through liberalising the economy, privatising industries, and giving loans - provided economic reforms are implemented.
Mood for change
But West African leaders called upon the IMF to chart a different course.
“We expect the IMF to adapt its instruments, methods and procedures, to take into account the current concerns of our countries, which are still poor and highly indebted,” Benin President Yayi Boni told journalists.
Sarah Williams, policy officer for international campaign organisation Jubilee Debt 2000, said more of the same kinds of fiscal liberalisation policies traditionally practiced by the IMF would be harmful for the poorest people in West Africa facing sharp food price rises.
“These policies have been shown time and time again to be harmful and undemocratic to the poorest countries and people. The IMF should give these West African governments the space to set their own economic policy priorities without dictating yet more to them. And debt relief must be part of this solution.”
Under debt cancellation measures, the debt burdens of Benin, Burkina Faso, Cameroon, Ghana, Mali, Mauritania, Niger and Senegal have been significantly reduced, but each country must still repay on average US$5 per person per year to creditors such as the IMF, according to the 2007 IMF Heavily Indebted Poor Countries Initiative report.
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