Skip to main content

Pussyfooting with the IMF


Christine Lagarde at Mindspeak
(image: @bobcollymore)
On Monday, 6th of January, 2014, I attended my first Mindspeak at the Intercontinental.

Like everyone else walking out of the packed room, I had a smirk on my face, and no, this was not due to the croissants that people were going to have for tea.

They wanna know, Who's that girl? (La, la, la, la, la, la, la, la, la, la, la)

Christine Lagarde had done an awesome job there, I was impressed. I'm quite surprised that Lagarde is not a diplomat, for she is quite good at the art of wooing people and making them look forward to the idiomatic trip to hell. But then again, that's her job, and I it looks like she really does earn her salary.

See, being in the same room as the International Monetary Fund and what are respected economists in this country, I expected that we would ask the hard questions, that Lagarde would break a sweat. That never happened.

I don't know what the issue was, we did not do our homework?

See, living in a country like Kenya, IMF  does impact your life a lot. In her talking notes and in answering questions later on, Lagarde made it clear that her trip here was not a courtesy call, she was here for work. She then went ahead to say that the IMF is in the business of bailing out countries, and doesn't come in if a countries policies are on the right tracks.

But what's IMF's business exactly? IMF stepped in to bail the Asian countries in the 1997 Asian Financial Crisis. Then, something to do with the real estate and lack of enough trade to support the exchange rate of Thailand's currency saw its value collapse. This in turn led to the collapse of currencies in neighbouring Indonesia, Philippines, Malaysia, South Korea and even Japan.

Then, IMF came in to support their currencies, with most currencies losing their value against the US Dollar by between 30 percent and 40 percent. The Indonesian currency took the crisis personally by losing 80 percent of its value.

A country like Kenya is a chief importer, which means that were we in Asia then, stuff would have increased price wise by at least one third of their current values to almost double. For every KSh. 100, you would be paying between KSh. 130 and Ksh. 180 the next year . (Medicine worth Ksh. 2,000 now would cost between KSh. 2,600 and Ksh. 3,600 in 12 months).

The IMF already assists Kenya, since we also do have a kaslight kaproblem in terms of production and export.

But then, IMF just doesn't help us like that. They give you money, and conditions.

Who's the IMF? Wikipedia is your friend here, though I will even suggest the good work done by Action Aid with their report here, which goes ahead to tell you why IMF is bad for us. (Yet we thought NGOs do nothing other than stop our political ambitions!)

I will base most of the remaining article on the Action Aid report.

The report lists IMF's key policy as below:

The SAPs Conditionalities in Kenya
  1. Low one-digit inflation rates
  2. High IMF-determined currency reserve levels
  3. Decreased public expenditure by the Government
  4. Reduced Government budget deficits 
  5. Ceilings on overall national resource envelope: the IMF determines money supply which in turn determines how much foreign aid may be accepted by the Government of Kenya in any given period
  6. Privatization of Parastatals/state owned corporations
  7. Trade liberalization
  8. Labour market reforms 
  9. Foreign investment deregulation, and
  10. Focus on production of goods for export rather than domestic production.
SAP is technical talk for "Structural Adjustment Programmes", or rather loans from IMF and their terms. 

Key IMF Fiscal and Monetary Policies promoted through SAPs

Inflation Targeting Policy

Low single digit inflation
10 and 20 percent are bad for economic growth
Reduging inflation below 10% will not reduce economic growth

Reduced Government Spending

Wage ceilings/caps–freezing of employment/salary increments
Sector ceilings especially for social sectors e.g. health and education
Cost Sharing Policy – people to pay for basic services previously provided by government

Currency ReservesPolicy

Floors (lowest level) on net foreign reserves to be mantained
Higher foreign exchange reserves safeguard against panics in financial markets and sudden reversals in capital flows

The Problem of Sacking workers and Reducing their Wages

Kenya has about 1 public servant for every 52 Kenyans, almost half of
whom are teachers (Image copied from the Business Daily)
The biggest impact of IMF policies has been a freeze on employment by the government and the continuing threat to reduce government workers. In the Moi eras, a good number of civil servants were actually sacked retrenched ( - a better term from the donors for the barbaric act of cutting a bread winner from their source of income). 

They also want wages for the remaining workers reduced. 

The issue here, as IMF rightly notes, is that we have economies that don't produce as much. For Kenya it's worse. Lagarde kept praising our economic growth rates of 5 percent, yet countries like ours normally grow at 10 percent. 

If you sack civil servants, you are basically taking away money from the economy. Civil servants have a guaranteed income, which is what drives bank loans and consumptions for a good portion of the private sector. 

I don't think reducing civil servants or their wages is as good an idea as IMF makes it sound like, unless you mean the civil servants who earn KSh. 3.7 million a month. The move is likely to hurt those that earn less than Ksh. 50,000 a month. 

Mind you, they want us to reduce government employees in a country facing a shortfall of doctors, nurses, police officers, and teachers. The IMF still thinks they are too many. 

Lol. 

And this is in a country why joblessness is becoming a big headache. 

Lol.

Pay for government services

Another bone to pick, from Action Aids report, IMF is a staunch fan of you paying for government services. 

Lol. 

As if you don't pay income taxes, and Value Added Tax, and Railway Development Levy, and Fuel Levy, and contribute 6 percent of your income to the NSSF. 

Contrasting with the Nordic Model

The Nordic Countries are the most developed in the world. Guess what they do? They employ a high number of government workers and ensure that health and education are available for free or at a very affordable cost. 

Put it, if you got a very bad accident in these countries, you would not need to hold several harambees to raise your hospital bills. You would end up in a hospital with enough doctors and nurses. 

Why is the IMF that important

IMF investing in a country convincing "leaders" of a country to accept its money and policies when the currency hasn't  fallen overnight is apparently a good sign for Western donors and investors, that they can trust in the country. 

The IMF has more than 180 members who vote on its policies. Major IMF decisions require an 85 percent majority vote. The United States of America has a 17 percent say. 

Lol. 

Back to Mindspeak

I was also surprised that Vimal Shah, head of the Kenya Private Sector Alliance, in his address (I'm confused who it was to, he kept glancing back to Lagarde and rarely speaking to the hundreds facing him) didn't really say much, or raise any issues. 

The closest questions to real issues was one Aly Khan asked by proxy, of how IMF benefits a pastoralists in North Eastern. 

Surprisingly, the other close "real issue" was asked by a Somali who described himself as a business man from Eastleigh. (Sorry, I can't remember the question, but I did not it down as a notable question - ha!)

As for the rest of us in the room, we probably don't feel the policies IMF advocates are injurious 

As for Madam Lagarde, she does a brilliantly good job representing the IMF, we just failed to take her to task!

I'm not an economist, but I speak my mind. 


Comments

Popular posts from this blog

RE: Appointment as Ambassador of the Republic of Kenya to The United States of America

Image: South African marriage courtesy The Telegraph ( http://www.telegraph.co.uk/news/worldnews/africaandindianocean/southafrica/6237922/South-African-man-marries-4-women-at-same-ceremony.html  ) Dennis Kioko, Address Pending. President to-be-elect, Republic of Kenya, Address Pending, Again. Dear Sirs/Madams, RE: Appointment as Ambassador of the Republic of Kenya to The United States of America  I would like to draw your attention to news reported across various sections of the press (way behind your daily portraits on the front page) that several Missions to the country are equivalently vacant with the duty of appointed high commissioners having expired. This includes Kenya's High Commission to the United States of America. Among your first duties, having assumed duty as Kenya's president, duly elected or otherwise, will be to appoint commissioners to these missions. It is in this regard that I highly invoke you to consider me as a likely appointment to the

Beers in Kenya: A sober opinion

Note: This is a dated post and has since been mostly passed by events. SAB Miller beers including Castle and Peroni are no longer widely available in Kenya after their exist. Sirville Brewery was bought out by Brew Bistro before being permanently shut in a tax dispute. Kenya is a land of milk, honey, beaches and taxes. I have penned, or is typed, a newer post here .  Peroni - One of the best beers in Kenya. Did a taste of canned and bottled Italian, and bottled Tanzanian I like the tangy flavour and body in Tanzanian Peroni. The can is close. Heineken drinkers will like the Italian one.  I have had a short beer swigging stint in my life. It has however been long enough for me to share my opinion of Kenyan beer. Interestingly, over the course of sharing such opinions with other drunkards connoisseurs,  I have found that we all have different views as to what beer is the best, which one makes you too drunk, or which one gives one free, extra hangover for every hangover you get

Nairobi's Top 4 Texas Brisket Places Reviewed and Ranked

Brisket on a bed of roast vegetables with barbecue sauce at Texas Brisket, Kikuyu  This review has been updated after a number of you suggested I try the brisket at County2County.  What's the best place to have Brisket in Nairobi? What's even brisket?  Brisket is one of the toughest cuts in a cow, from around the belly. It is so tough that it has to be smoked for about 16 hours to tenderise. But that there, is the catch.  12 to 16 hours later, it is the most flavourful and softest cut you will ever have. So full of flavour and so soft you can pick it apart with your fingers.  However, due to the long cooking time involved, only a few places offer brisket in Nairobi.  The best so far is Texas Brisket which is located within Kikuyu Railway station.  They do the meat for a proper 16 hours, and will usually have a fatty or non-fatty portion. The fatty portions are more tasty. A 500 gram serving goes for KSh. 900 and a 1 KG order comes with a serving of free fries. Their brisket has

A to Z of Girl Pick-up Lines

Girl,  You are like a breath of fresh air , like an outstanding piece of Art in an art gallery  There are many things you and me can be, but it puts a smile of satisfaction on my face and a smile of envy on my buddies faces that you both beautiful and bootyfull  E ither your creator must have taken the greatest care creating you or your cheated your way around heaven, 'coz you clearly the prettiest girl on earth  D on't ask why my breathing quickens every time I see you; setting my eyes on you makes me feel like I am drowning in your beauty, I have to catch my breath   Exciting, Exotic, Elegant, Electrifying ; so many definitions in english , but when it comes to the human race, girl, you are the one and only definition of all the above  W hen I say you are fly , it may be due to the sensation of flying off the ground that I get when I am around you. Some girls are beautiful, a few are decent, even fewer got class; I didn't know I could find all this qualities in one gir

Lusaka and Livingstone Zambia to Namibia By Road

Zambia is a pretty large country,  an exciting one and with no shortage of potholes.  For instance, take the direct route from Lusaka - Livingstone to Namibia through the Sesheke - Katima Mulilo border crossing. Typically, roads are either good or tend to have potholes here and there. However, the last 120 kilometres of the Livingstone to Sesheke/Katima Mulilo route are best described as potholes dotted by some road here and there for the just thirty kilometres past Kazungula town, which is also the Zambia - Botswana border crossing.  Trying to drive to Sesheke is so bad it will take you anywhere between 4 hours to 6 hours to navigate those 100 kilometres. You may or may not have your dignity at the end and your vehicle may be in more than one piece.  If you really must use the Sesheke - Katima Mulilo crossing as of December 2022, then take the 900 kilometre longer detour from Lusaka to Mongu then back to Katima Mulilo. It doesn't guarantee you absence of potholes, but at least the