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The untold story about IMF’s cash grants
2006-05-03 08:42:55
By Mireny John
Any moment news is flashed about Tanzania getting cash grant from the International Monetary Fund (IMF) or the World Bank, the unsuspecting minds think about another national debt being committed.
Not only that; popular belief regards IMF loans as demeaning to the national honour because of the presupposed litany of conditionalities linked to them, as a matter of principle.
This kind of mind set originates from the politics of the early 1980s which, sought to explain why the country’s economy was growing at a negative rate.
Authorities repeatedly told us that one of the reasons behind the economic quandary was tough lending conditionalities prescribed by the WB and IMF.
Because the doors of alternative sources of information were tightly closed, everyone almost believed so, and a whole generation came to believe that the multilateral lending bodies were fire-breathing monsters.
Popular hatred was consolidated by the fact that structural adjustment programs were intensely painful to the poor, especially when free services were abolished.
Over time, new things and approaches to financing development in the poor countries like Tanzania have evolved.
For instance, after efforts to restructure the economy started showing signs of recovery, a much more human-face approach to lending has been agreed upon.
The Poverty Reduction and Growth Facility (PRGF) for example, is not as rigid as it were thought of in the beginning.
Tanzania has secured a total of USD24.1m from the IMF, partly for addressing the social and economic impediments to growth, especially those related to prolonged drought and energy crisis.
The point the public often misses out is about the nature and character of these multilateral loans.
In strict terms of the world of competitive finance, these are not commercial loans, for they are subjected to exceptionally long grace periods and a mere 0.5 percent service charge.
At the end of the day, they are called grants. In the past, such grants were grossly misused by governments of borrowing poor countries, cumulating into huge, unserviceable debts.
That is why in recent times, grants from World Bank or IMF are chained to a string of conditionalities, and, in the 1980s, some of them were so stringent to the extent of inhibiting the intended objectives.
The world of finance is such that no loan or even donation from charities comes without any directives on spending and expected outcomes.
What is wrong, as an instance, in prioritising expenditure on subsidising food meant for vulnerable families after net national shortage caused by the drought?
Is it sinful to support systems maintenance and operations of TaNECSO, the power utility company at a time when the whole country had been plunged into unprecedented energy crisis?
Governance has to be conditioned. Otherwise, it will be difficult to administer accountability, reward or punish.
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