Reimagining Africa’s Future: IMF, World Bank, and the Quest for Economic Justice
In just a few days, the IMF and the World Bank will convene on African soil for the first time in decades. The question of whether they should be convening here after the years of turmoil they’ve unleashed remains a highly contested topic. However, what’s undeniable is that the outcomes of these meetings will have far-reaching implications for us all. Using Malawi as a case, this piece serves as a reminder of the IMF’s complicity in the exploitation and extraction of Africa’s resources and the lives we have lost in the process.
The IMF’s Impact on Malawi’s Economic and Social Trajectory
Like many countries in the Global South, Malawi’s initiation into the world of the IMF was marked by the painful ordeal of Structural Adjustment Programs (SAPs) in the 1980s. During this time, as the world was experiencing a series of crises, SAPs were imposed by the International Monetary Fund and the World Bank as a loan conditionality to assist highly indebted countries recover. The rationale was that SAPs would stimulate economic growth by cutting down on social spending and transferring state responsibility to the private sector. This meant restructuring the economy to attract foreign direct investment by liberalizing trade, privatizing state-owned enterprises and deregulating safeguards and regulations including labor rights laws.
The first SAP in Malawi sought to raise maize prices, while the second focused on liberalizing agriculture in 1986 and the third abolished agriculture input subsidies and called for estate management reform. Consequently, Malawi initiated market liberalization in 1987, ended all subsidies for maize and removed price controls for most smallholder crops except maize. This led to an immediate increased cost of agriculture inputs and economic vulnerability followed by a prolonged period of hunger. Furthermore, the Malawi Kwacha was devalued by 62% in 1998, 33.6% in 2012 another 25% in 2022 at the peak of the Covid-19 pandemic and more recently in June 2023 we have witnessed a 2.68% depreciation.
Since 1981, Malawi has endured more than 10 SAPs and Fiscal Restructuring and Deregulation Programmes. These policies have resulted in significant government restructuring, imposition of public sector wage bill caps, cuts in social protection, the introduction of user fees in healthcare, and in some instances, the complete privatization of healthcare and education. Collectively, these have negatively impacted citizens, particularly women and marginalized communities and manifest in immensely heart- breaking ways. For example, we see mothers watching their children die after bringing them to the hospital only to be told that there is a shortage of medicine, doctors and nurses. In other cases, we see people visiting public hospitals and being sent to private pharmacies where they cannot afford prescribed medication. This has forced people to rely on over-the-counter remedies like Panadol, hoping for miraculous healing. For some, the discouraging prospect of spending money on transportation, compounded by rising fuel costs, to receive a diagnosis that could have easily been prevented by the availability of resources has led them to forgo seeking medical care altogether.
Grappling with Multiple Intersecting Crises: Will the IMF Save Us?
Malawi is currently recovering from catastrophic consequences of Tropical Cyclone Freddy which affected 15 districts, leading to death, displacement and destruction, paired with the cholera and polio outbreaks as well as the ongoing food and energy crisis. As expected, there are ongoing negotiations with the IMF for an Extended Credit Facility arrangement which could be up to SDR 131.86 million (about $174.00 million, representing 95 percent of Malawi’s IMF quota) over a period of four years.
Learning from the past and more recent times, we find ourselves grappling with multiple crises, yet the prescription remains unaltered: austerity measures, or fiscal consolidation, as starkly exemplified during the COVID-19 pandemic. The need for more investments in public health and social spending during the pandemic was not an issue to be contested. Yet, the IMF in their negotiation of 76 out of 91 loans with 81 countries recommended cuts to public expenditure, particularly targeting public sector workers who are crucial to recovery during a global health crisis.
This placed an undue burden on women, who, as always, stand at the frontline, due to society’s ingrained assumptions of their care responsibilities.
Unveiling the IMF’s Agenda: Neoliberal Capitalism
As we delve into our historical narrative, it becomes more apparent that the IMF’s mission is to advance neoliberal capitalism at the expense of people and the planet. Clara E. Mattei calls this political project the ‘Austerity Trinity ’which has been more than just an economic tool, but it also plays an instrumental role in preserving the current economic system. Among many things, it undermines the ability of highly indebted African countries to implement robust domestic resource mobilization strategies which would ensure the provision of essential public services, particularly during crises.
An illustration of the most recent experience with these intense rounds of austerity is when Malawi received an emergency relief loan from the IMF to support Covid-19 recovery. Not long after the IMF’s visit where they had their ‘closed door’ meetings with our government, the Malawi Kwacha depreciated by 25% followed by a tremendous increase of consumption and Value Added Tax on essential goods and services. As predicted, this led to a surge in the cost of basic commodities and the results have been catastrophic. The Integrated Food Security Classification found that 3 million people, representing 15% of the total population are experiencing acute hunger and the number is expected to increase to 4.4 million from October 2023 to March 2024.
Although this has been exacerbated by multiple intersecting factors including climatic shocks and economic decline compounded by forex shortages, inflation and high cost of commodities, we have to name the powers driving this and their agenda. To be frank, this system has been carefully crafted to exploit our labor and extract our resources for the benefit of the elite few, who are primarily in the global north. It’s no coincidence that the IMF imposes regressive tax policies such as VAT as opposed to pushing for more progressive tax policies like wealth taxes, an increase in Corporate Income Tax for multinational corporations or generally more stringent tax policies to combat illicit financial flows.
As we unmask the conspiracy, we see that the idea is to create an enabling environment for the rich to accrue more wealth, through tax evasion tactics while the rest of us are being told that we just have to ‘work harder’ or make do with less, essentially giving us a death sentence. Not only does this perpetuate inequality, but it also relentlessly strips us of our dignity, identity as well as our love and care for each other, and the planet.
Demanding Accountability and a New Global Economic Order
Historical instances such as the 2002 famine in Malawi underscore the IMF’s tendency to evade accountability for the human cost of its policy recommendations. During that period, Malawi was grappling with food shortages in the wake of a combination of floods and a regional drought. To no surprise, the IMF went into their neoliberal playbook and insisted that the government sell maize from its strategic reserve and abandon its starter pack agricultural subsidy program. This policy decision led to famine in the country and many lives were lost. Surprisingly (or not quite), the IMF’s representative in Malawi at that time disclaimed any expertise in food security policies stating, “We have no expertise in food security policy, and we did not instruct the Malawi Government or the National Food Reserve Agency (NFRA) to dispose of the reserves”.
The extent of hypocrisy and ridicule we encounter from both the IMF and The World Bank is rather offensive, to put it mildly. During the mid-2000s, the Malawian government, after enduring numerous cycles of austerity measures and food shortages, took a courageous step by prioritizing the well-being of its citizens through the reinstatement of Agricultural Input Subsidies. As a result, Malawi witnessed a significant increase in crop yields and even became a surplus maize exporter to other Southern African nations. However, the representative of The World Bank in Malawi at that time criticized this policy, arguing that it improved food security but hindered market development.
Once again, we see the two institutions prioritizing profit accumulation and playing Russian Roulette with our lives, as if the years of endless torment and terror have not done enough, as if they have not had enough blood on their hands. We then have to ask ourselves, when will it end? And is there hope for a more promising future?
Fostering Radical Hope: Restoring the Social Contract for a Just Global Economy
To move forward, I believe we need nothing short of a radical reimagining of the world order and the prevailing norms governing global economics. This entails a call for reparative justice by understanding our political context through the framework of decolonization.
Prof Sylvia Tamale in her book ‘Decolonization and Afro-Feminism’ invites us to reimagine our work of decolonization and decolonial rethinking, to ensure that it entails much more than Band-Aid approaches, beginning with fully appreciating the structural, institutional and psychological linkages that still link Africa to Western neo colonial interests and exploitation. This means calling for an overhaul of the global economic and governance architecture which has been built on legacies of colonialism, imperialism, neoliberalism, and all oppressive systems and structures.
Restoring the social contract between the state and the people must be at the heart of the change we intend to see. This entails prioritizing domestic resource mobilization more specifically through the introduction of a wealth tax. Many studies have provided arguments for progressive taxation on wealth, income, and large inheritances as effective mechanisms to reallocate finance to those most impacted by crises including climate change. In the context of climate justice, it means taxing highly polluting sectors of the economy such as aviation, shipping, the automotive industry, or Big Tech.
Finally, we must strengthen our tax system to combat Illicit Financial Flows (IFFs). This would be highly effective as Africa incurs substantial losses, approximately 88.6 billion USD due to IFFs, as multinational corporations consistently employ methods to evade their tax responsibilities. Among various well-researched strategies already in place is the establishment of a United Nations Convention on International Tax Cooperation. This Convention would transfer the authority of setting global tax standards from the Organization for Economic Cooperation and Development (OECD)- also known as the ‘club of most rich countries’ to the United Nations. This move would essentially loosen the grip that the former colonial powers comprising the OECD have maintained over global tax regulations since the dismantling of their empires. Additionally, this would mean reinforcing the practice of country-by-country financial reporting for multinational corporations and enhancing Beneficial Ownership Transparency. Combined, these strategies push us closer to raising more revenue to finance public services and restoring the social contract.
As we engage in these meetings, whatever complex emotions we might be feeling, let’s adopt the essence of Sankofa as it is encouraging us to welcome the wisdom of the past. It reminds us that we cannot move forward without benefiting from the insights of our history.
