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Cambodia not alone in challenging IMF-World Bank demands

Cambodia not alone in challenging IMF-World Bank demands

The following is an extract from a letter from Carlos Nuno-Castel Branco, an economics

lecturer at Eduardo Mondlane University in Mozambique, to Eva Mysliwiec, director

of the Cambodia Development Resource Institute (CDRI).

Dr. Nuno-Castel Branco delivered a paper during January's International Roundtable

on the Cambodian structural adjustment program (SAP), hosted by CDRI in Phnom Penh.

The "SAP" program describes the conditions the IMF and the World Bank set

on their loans to developing countries, encouraging market forces to rule rather

than the state.

Mozambique's recent political experience is very similar to Cambodia's - and Mozambique

"has realized that the IMF-World Bank SAP is not the way ahead." Such sentiments

are similar to those now being heard in Phnom Penh.

Dr. Nuno-Castel Branco's comments are reprinted here courtesy of Ms Mysliwiec.

WHEN I came back from Cambodia, I was interviewed by the Mozambique radio for a Saturday

noon program about my trip.

I thought I was safe, because at that time and day nobody would be listening. However,

I realized later that many people did listen.

The interesting thing that people liked in the interview: 1) the idea of a Roundtable

to think about stabilization, adjustment and the way forward; 2) the confirmation

that SAP doesn't work very well, not only in Moz-ambique; 3) the conflict between

short-term stabilization on one hand, and structural constraints/problems on the

other, and: 4) the fact that Cambodia's most recent political experience is so similar

to the Mozambican, and the lessons one can learn about the content and form of democracy.

Basically, people liked thinking that "we're not alone in this hell"; if

you are not alone, then the trouble is not entirely your fault, then you may succeed

in finding different, more efficient ways forward. If you're not alone, your bargaining

power may increase, and that means more hope.

We've had our own Roundtable here, organized by the Faculty of Economics of Eduardo

Mondlane University and the Ministry of Planning and Finance.

The theme was "Alternative strategies to accelerate economic growth," and

it was opened by the Prime Minister. He said something interesting, coming from the

government: that the Mozambican economy is growing slower now than during the last

period of the war. The average annual GDP growth between 1987 and 1989 was six percent

(the war was over in 1992). Between 1990 and 1995, that growth was 2.4 percent (below

the annual average growth of population, which was around three percent), if you

include 1993. In 1993, GDP growth rate was 19 percent, mostly due to ONUMOZ - the

UN peacekeeping operation and special peace related programs - like the UNTAC in

Cambodia. The cost of ONUMOZ operations was just above the annual GDP of the previous

year!

In addition, the Prime Minister said basic stabilization targets have not been reached

or were reached at a very high cost.

For example, the targeted rate of inflation for 1995 was 24 percent, and actual inflation

rate was a little more than 54 percent. Between 1990 and 1995, inflation in Mozambique

fluctuated between 33 and 72 percent. This was so despite very tight monetary and

fiscal policies including cuts in government spending and investment. This is no

doubt damaging for a country coming out of 16 years of devastating war, with little

private investment. The meager amounts of foreign direct investment were going to,

what we call, import-export super-market companies and traditional sectors like cotton

and cashew.

In sum, the government realized that the IMF-World Bank SAP is not the way forward,

neither to stabilize nor to develop the economy.

The PM called for a "National Coalition for Mozambique", as opposed to

"an international coalition for Africa" (isn't that similar to the CAP

[Cambodian Adjustment Program] we talked about in Phnom Penh?).

The problem is that the government knows pretty well which decisions should be taken

(for example, the emphasis of our Roundtable was on rural development - sounds so

familiar?).

The trouble is the political implications of such decisions, the bargaining power

of different lobbies (national and international ones) and the technical and institutional

ability to prepare pragmatic and real strategic and current decisions and programs.

The most important outcomes of the roundtable were: 1) a definition of priority areas

for further research, and; 2) the government's idea of organizing a "think tank."

All this must sound familiar to you, I am sure.

As you can see, you are not alone in this process; so be happy and keep your fingers

crossed. At the end of the day, the round table was very interesting... I mean, most

of it. For the first time top officials of the government, academics and selected

representatives of the international community got together to discuss openly and,

sometimes, aggressively. That was good, I think.

Before I finish, let me tell you some interesting stories.

The USAID economist said that the East Asian tigers succeeded because they opened

up their economies and always gave priority to macroeconomic stabilization (God bless

him, but he was not one of those chaps who listened to my Saturday noon interview!).

The European Community economist said that what we have to do is to liberalize the

economy completely to attract more unconstrained foreign investment (another one

who was God knows where on Saturday afternoon). The IMF team-leader tried to explain

step-by-step, in a low intensity voice but certainly paternalistic in tone, why and

how to fight inflation on a priority basis: because inflation hits the poor the most.

I asked him if it would not be better to eliminate "the poor" instead.

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