- As a response to the global crisis and an increased capital basis, the International Monetary Fund (IMF) has already more than doubled its lending to Africa this year compared to the record year of 2008. The Fund accepts less security, larger budget deficits but also demands shorter repayment terms.
At a 'Lending for Africa' seminar at IMF headquarters in Washington this week, the Fund's Senior Advisor Roger Nord revealed that record lending programmes had already been initiated. IMF funding for Africa was on a steep rise since the global crisis had started.
"In the first five months of 2009, we have committed about US$ 1.6 billion to Africa. Now, that compares to US$ 1.1 [billion] for the whole of 2008, and US$ 0.2 billion in 2007, so I think the trend is relatively clear," Mr Nord told his audience.
But the senior IMF official said growth in lending for Africa was to continue to rise. "If we look ahead, the remainder of 2009, we expect it to be likely that the stock of our lending in Africa will double in 2009 relative to where it stood at the end of 2008," Mr Nord said.
African governments are benefiting from the British-American proposal at the G-20 summit in March to treble the IMF's lending capacity to US$ 750 billion to assist countries hit hard by the global crisis. With new capital in the Fund, lending conditions have been relaxed to a point where a leading IMF representative admitted to the German journal 'Spiegel': "We have almost no control over how this money is used."
According to Mr Nord, the record lending was "a reflection of the IMF's conscious policy to scale up our assistance to Africa." The Fund's Executive Board decided in April to double credit limits for low income countries. Mr Nord said this "made access to our resources much more flexible, and in many cases, much quicker."
Ethiopia is one of the countries recently benefiting from this new IMF policy. "Ethiopia did not have a programme with the IMF previously, and it was able to negotiate and obtain financing from us very, very quickly," Mr Nord said. In the case of Zambia, the Fund quickly approved a US$ 300 million augmentation of existing lending programmes to meet problems by "the fall in international commodity prices, and notably copper," Mr Nord said.
Also Tanzania and Kenya have been given quick access to additional funds from the IMF. On Friday, the Fund approved of a credit line extension of approximately US$ 330 million to be disbursed within a few days. The loan enables Tanzania to widen its budget deficit to keep investing in infrastructure as state revenues are falling or stagnant. Kenya's loan of US$ 209 million is to help "financing gap in the balance of payments."
The quick expansion of IMF loans to Africa has raised concerns about the possible new accumulation of non-repayable debts if the global crisis should last longer than the Fund now predicts. These concerns are strengthened by the terms of the new loans and credit lines, which are to be payd back in a shorter time than the usually advantageous loans given by the Fund.
"It is fair to say that the IMF financing is shorter term than that from other institutions," Mr Nord admitted at the Washington meeting. But the loans, given under the IMF's exogenous shocks facility, were said to carry the same terms as poverty reduction funding, "which is five years grace and a ten year repayment period and an interest rate of 0.5 percent," Mr Nord said.
Asked about the danger of larger budget deficits financed through IMF loans, Mr Nord said that credits were given on a case-to-case basis, always assessing the country's debt sustainability. But, "where there is room, the IMF has supported allowing fiscal deficits to widen," Mr Nord admitted.
The Fund was responding to what is seen as only a temporary slowdown of African economies, which in most cases kept on growing. After the crisis, the Fund expects growth to get back to 2008 levels within a few years.
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