Does IMF`s argument make senses?


Does IMF`s argument make senses?

By Muluken 9/21/12
International Financial Institutions like the IMF and other donors and lenders usually contend that the development of the third world merely depends on the good will and developmental indications of theirs. Such institutions and donor countries claim to be developmental policy indicator for the countries of the third world. Further more, they tend to prescribe the third world the alternative policy they believe best fits the third world.

When it comes to Ethiopian developmental activities, IMF has always been one of the top most pessimists. Recently, IMF has prescribed Ethiopia to slow down its mega project on the Nile River-the Grand Ethiopian Renaissance Dam. IMF stated that the project is consuming budgets of other projects in the country causing profound effect on the national economy. Further more, IMF states that the project should slow its pace so that other national projects will not be affected by budget problem as the dam consumes the vast majority of money.

Ethiopia knows that the developmental activities in general and of the industrial transformation, it is utilizing, in specific are attainable with the supply of sufficient electric power. It is in such calculation that Ethiopia prioritizes the construction of the Renaissance Dam. The dam, even though a lot of complaints are directed towards it, is one of the back bone of Ethiopia`s transformation. Thus, Ethiopia strives to its accomplishment in every possible means.

“The construction of the dam will not be rescheduled” says Bereket Simon, Ministery of Communication Affairs. The project, according to Bereket, was a well considered plan and it is one of the mega project for which the governemnt commits itself unconditionally. Similar to Bereket`s statement, the people of Ethiopia are working day and night for accomplishing the project. The people more significantly know that the project is one of their way outs from rampant poverty.

It is known that Ethiopia couldn’t secure the loan it required to build the dam from lenders like the IMF itself. The reasons, of course being too many, international financial institutions like the IMF have opposed Ethiopia`s loan proposals. In addition to their opposition of the loan request, these institutions still claim to be Ethiopian developmental optimists by dictating it to stop its development. IMF prescribes the country should stop its mega project stating it profoundly affects the future economic growth of the country.

Ethiopia however strongly believes that the Renaissance Dam is one of the pioneers of its developmental endeavor. For the better future prospects, Ethiopia strives to accomplish the project in every possible way. IMF`s potential accusation emanates from the fear that the project is consuming huge amount of money which otherwise would have been used for other projects.

The significance of the project is very wide and unprecedented in the political economy of the country. Ethiopia as being one of the poorest on the planet has always been dependent on the loans and grants of donors. Such economic dependency has created political dependency which made the country only to serve the interest and desire of the donors.

However, once Ethiopia maintained freedom from financial dependency and started utilizing such a mega project by its own capital, then come the meaty complaints of its former lenders like the IMF. The political decision of the country to build the Grand Renaissance Dam on the Nile River has surprised the former lenders and political pessimists in the Nile Basin. Such complains emanate from failure to control Ethiopia in political sense.

Up on starting the mega project Ethiopia has preconceived that the project would only be financed by its own capital. For the accomplishment of the project Ethiopia has so far collected some 5 billion birr form its nationals in the forms of Bonds. The allegation of IMF emanates from two perspectives-failures from understanding the financial reality of the country and pessimism.

The role the IMF and similar institutions play is nothing but neo-colonialism. History remembers that the post-1960s and 70s were the golden years of African economy. In those years several African countries maintained self-reliant economy with surplus production. Nevertheless in 1980s International Financial Institutions and the western countries introduced free market policies, consequently, Africa`s economy began to decline.

Following the decline of economy, many African countries went to the IMF and WB. The financial institutions gave them money along with neo liberal policy. Such measure of the institution, especially the case of the former Structural Adjustment Program (SAP), further exacerbated the economic decline of African Countries.

Recently, Ethiopia attempted to peruse policies of self-reliance unlike the policies of IMF and WB that intends to integrate Ethiopia to the world capitalist system with comparative disadvantage. When countries like Ethiopia fail to follow such prescriptions, I MF and WB start to oppose any developmental projects. This week’s allegation was nothing but the continuation of the old strategy.

When institutions like the IMF prescribed Ethiopia to stop or slow down the project, they won’t prescribe the better solution nor do they state valid argument. As it has been the case since 1990s, International Financial Institutions want the third world to develop only through the road maps they prescribed. Such pessimists usually argue that the better way for the third world development is only through the ladder kind of structure dictated by liberalism. Like the old modernization thought, the IFIs still prescribe the elongated means of development for the third world.

Any country like Ethiopia that tried to kick away the ladder of development the IFIs designed will be prescribed to follow the policy orientations made in the corridors of offices of IMF, WB and WTO. All these institutions need is that third world should remain poor or follow their policy orientations. They feel that as far as they lend the money, they will dictate the policy. And even when they contribute no penny they try to tell the third world that it is on the wrong path. Such institutions, being always correct, the rest of the world is always wrong. Such is developmental pessimism; such is unfair world economic structure; such is the late 1980s core-periphery paradigm!

The country representative of IMF, Jan Mekkelsen, argues that Ethiopia`s mega project absorbs all domestic financing. He added that the project profoundly affects domestic financing because it consumes the money which will other wise be used for normal trade and business. However the representative’s allegation misses the reality of the country`s financial stand with regard to the project.

Nevertheless, according to Bereket, Ministry of Communication Affairs and member of the Fund Raising Committee of the Dam, as much as 5 billion birr has been raised for the project so far from the public by selling bonds that pay 5.5 or 6 percent interest. The national mobilization and bond selling show great support of the people to the project. More over, as the fund is mostly contributed from the people, other national projects and the economy of the nation will not be affected to that matter.

More significantly, most Ethiopians believe that the project is one of their ways out from poverty. They believe that the sooner it is accomplished the better their lives become. In addition, all the domestic financial systems are being carried on along with the project. When Ethiopia planned the mega project, there was one pillar in the policy that was alleviating poverty in every possible means.

Ethiopia preconceived that the project is intended to end poverty and transform its population in to a better living standard. More over, the project supplies some 6000 MW electric power to the domestic consumption which will also create power export potential. According to Access Capital, Ethiopian Electric Power Corp. began exporting power to the neighboring Djibouti in May 2010. Ethiopia palns to ship as much as 2,000 MW to Egypt and 1,200 MW to Sudan by 2020. From the export, Ethiopia expects to earn about 1.6 billion dollar a year, states Acceess Capital.

In addition to the income for Ethiopia, the project supports economic integration in the region and sets up condition of mutual benefit between and among the basin countries. More over, the project puts forth conditions of benefit sharing among the basin nations. Ethiopia, being geographically advantageous, has huge HEP potential while the lower riparian -Sudan and Egypt-have irrigable land. Such a move creates mutual benefit among the nations, there by fostering economic and infrastructural integration.

Bereket said that the mega project is one of the lofty ideas of the late premier Meles Zenawi. He added that the people are currently mobilized to show commitment to accomplish the vision of the late premier. The project, according to Bereket, is the brain child of Meles that needs to be accomplished.

The usual allegations of the IFIs like the IMF steams out from the developmental pessimism. Such organization always tends to prescribe their policy dictation for the poor country. They even don’t want to see that the poor nation has the word on its own affairs. Such restrictions and coercive dictations might serve the interest of the financial institutes and some lender and donors. However, it will affect the political economy of one country there by down sizing its political autonomy.

With regard to the Grand Renaissance Dam Project, the allegation and prescription of institutions like the IMF will not hinder Ethiopia from accomplishing the reactant of its renaissance. More over, the frequent allegations will not obstruct its rapid economic growth. The government of Ethiopia has previously checked the trade offs of the financial system with regard to the dam project. The project is currently going well in harmony with other national projects.

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