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Taking the Credit: African leaders to benefit from improved IMF relations
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Rwanda's President Paul Kagame was a recent guest
of British Prime Minister Gordon Brown at 10 Downing
street, London. (AP Photo/Lefteris Pitarakis)
Rwanda’s central bank has taken a page out of the International Monetary Fund’s book by deciding to extend access to credit as a means of alleviating poverty and strengthening its economy, reports the IPS news agency. Like the IMF, which recently announced a more flexible lending policy to help marginalized, low-income countries, the Rwandan government has launched a credit line that specifically targets female entrepreneurs. The system will be implemented through local financial institutions, says IPS, with micro-loans being set against collateral guarantees, and repayment periods offering enough time for entrepreneurs to turn a profit. By offering assistance to this segment of its population, the East African nation is helping to maximize the female contribution to a male-dominated business sector and to the battered economy in general. Francois Kanimba, director-general of Rwanda’s central bank, says the government is committed to not only strengthening employment and loosening poverty’s grip on society, but also to empowering women.
The aforementioned IMF loan package, while raising borrowing limits and providing higher concessionality (lower interest rates), will also include “more flexible terms.” Dominique Strauss-Kahn, Managing Director of the organization, hailed the decision to restructure debt frameworks: “This is an unprecedented scaling up of IMF support for the poorest countries, in sub-Saharan Africa and all over the world,” he said. Supportive measures, as described on the IMF website, are based on an increase in funds and, most significantly, on greater accessibility. The IMF usually requires low-income countries to outline and follow strict policy regimes in qualifying for low-interest loans, but recent changes to the system give poorer countries more freedom in their fiscal affairs. The Rapid Credit Facility is one of such additions, offering “emergency support with limited conditionality.” A plan to provide $18 billion in Special Drawing Rights to boost poor countries’ foreign exchange reserves is also on the table, suggesting there might be even more support for irresponsible fiscal behaviour. Such generous lending practices are oddly reminiscent of the IMF’s use of the Flexible Credit Line (FCL), which is usually reserved for countries with “strong fundamentals” and a “track record of policy implementation.” The FCL gives central banks quick, no-strings-attached access to funds, as it expects economically advanced beneficiaries to make policy adjustments without the impetus of IMF conditions.
Rwanda’s credit facility for female entrepreneurs, IPS reports, has been criticized by some for its lack of transparency. A Rwandan businesswoman, Solange Uwimbabazi, is quoted as saying “There is discrimination…Some groups of women are excluded to benefit from loans. The wealthiest groups are considered the most.” The central bank’s director-general, Francois Kanimba, has responded to such criticism by emphasizing the importance of an educated female workforce. "The funds are available, but people need to be educated enough on how they will manage their project, and they must show that they have the capacity of ownership. (Were the business to fail) they should not be looking for scapegoats elsewhere.”
Unfortunately, educated central bank chiefs are not ultimately responsible for the governing of African countries. If they were, they might call for more vigilance in signing contracts with the IMF. They might also advocate a public information campaign to explain the IMF’s sometimes-convoluted lending practices to its citizens. Last month’s African Union summit, a biannual gathering of 53 leaders, made clear what Africa’s presidents, the real decision makers, are paid to do: In addition to calling for the creation of a United States of Africa and for a stronger negotiating presence at international gatherings, says the BBC, they also pleaded with the IMF to honour a commitment made at a recent G20 summit to provide more assistance to their disenfranchised continent.
With lowered conditionality and ultra-flexible loans, the IMF seems to have done just that. “Join the club,” it appears to be saying, while pulling already-dependent economies deeper into its fold. Ironically, taking on more debt might be the only way to survive a recession instigated by donor countries: And what a shame. But it will be utterly shameful if Africa’s ‘big men’ keep begging to ‘hang with the big boys’ at clubs like the G20, the WTO and the IMF. When economic realities set in, and irresponsible spending invites cold handshakes and familiar IMF conditions, the uneducated masses will be left to foot the crushing bill.
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