ABOUT ZAMBIA’S OVER-RELIANCE ON BRETTON WOODS INSTITUTIONS: A CASE OF NAIVETY OR LACK OF PATRIOTISM?
By Sean Tembo – PeP President
1. The International Monetary Fund (IMF) and World Bank Group (WBG) are collectively referred to as Bretton Woods Institutions, named after Bretton Woods County in New Hampshire, USA where 43 countries met in July of 1944 to come up with a post-war international economic order. The history of these Bretton Woods Institutions in Africa and other developing nations the world over has been bitter-sweet in the sense that they have been used to influence and control the economic agenda of these poor nations in return for paltry financial aid in one form or another.
2. In other words, these Bretton Woods Institutions dictate to Governments in poor countries, who should exploit their natural resources (which in the case of Zambia is mainly copper and related minerals) and on what terms, and in return provide these poor countries with just enough financial aid to keep them yearning for more, but not enough for them to transform their economies and become self-sufficient. This is for obvious reasons, because an economically self-sufficient country will not find it necessary to deal with these Bretton Woods Institutions and to be subjected to their dictates in terms of economic policy and natural resource exploitation.
3. Put simply, it is in the best interests of Bretton Woods Institutions that a country must remain poor, which to some extent explains the bizarre nature of some economic policies that are imposed on “beneficiary” countries like Zambia, which in my considered view are meant to undermine, rather than build our economy. Take for instance the insistence by the IMF that Government should obtain a $1.3 billion loan from them, as a precondition to debt restructuring? If our biggest problem is over-borrowing, then why should the IMF tell us that borrowing more, albeit from them, is the solution? Additionally, what was the rationale of the IMF pushing Government to give tax holidays to the mines, there by diminishing our internal revenue base, especially given the fact that the majority of beneficiary companies of the tax holidays are companies that come from key members of these Bretton Woods Institutions? How does it benefit us as a nation to give up tax revenue in return for a loan from the IMF?
4. Other bizarre IMF conditions include the insistence that Government should review fuel prices on a monthly basis, which creates a fundamental uncertainty in our economy, and we all know that there is no economy that can grow in an uncertain environment. Is this a deliberate ploy by the IMF to ensure that we do not attain economic independence and are forever enslaved to them as they continue to use their proxies to extract our minerals without paying tax? Also look at the other IMF conditions such as the increment of tariffs by ZESCO which has resulted in the closure of several energy-intrnsive businesses such as manganese mines, steel companies etcetera, thereby increasing unemployment levels as well as causing untold hardships on domestic consumers.
5. Why should we be told not to subsidize a key production input such as electricity when the US Government spent more than $200 billion in the previous fiscal year subsidizing what they call “clean energy” but energy nonetheless? It is a matter of common sense that the benefits to an economy of subsidizing energy far outweigh the cost. So why are we being told otherwise? Why are we being compelled to practice the purest form of capitalism which even the founders of these Bretton Woods Institutions do not practice in their respective countries? Do these Bretton Woods Institutions have our best interests at heart, or they are here to sabotage us? Should our Government blindly embrace each and every economic policy imposed on us by these Bretton Woods Institutions or we need to begin to question some of their senseless policy proposals? Does our Government have the backbone to stand up to these Bretton Woods Institutions? Is it possible for foreign institutions to have Zambia’s best interests at heart?
6. Which brings us to the issue of debt restructuring. Out of our current external debt portfolio of about $14 billion, approximately $4 billion is with Bretton Woods Institutions, about $3.5 billion with commercial lenders such as Eurobond holders and approximately $6.5 billion with bilateral lenders such as China. The debt restructuring agreement recently reached by President Hakainde Hichilema in Paris is not for the entire $14 billion of our external debt, but merely $6.5 billion owed to bilateral creditors, which is mostly China. The reason this so-called debt restructuring agreement took very long to be reached is because of the insistence by Bretton Woods Institutions that only bilateral debt should be restructured, while China insisted that all debt should be restructured including the $4 billion or so that we owe to the Bretton Woods Institutions themselves. When the US Treasury Secretary; Janet Yellen was in the country a few months ago, there was a public spat on this issue with the Chinese Embassy in Zambia.
7. If you ask me, l think the position taken by China was more sound and reasonable. I mean, why should the Bretton Woods Institutions insist that other creditors must restructure their loan portfolio to us while they themselves are refusing to do so? Is it a question of these Bretton Woods Institutions wanting others to reduce their debt portfolio on us while they themselves increase theirs so that they can have sole and absolute sway on us and our economic affairs? Does that explain why they forced an IMF loan of $1.3 billion on us while we were already heavily indebted? Does our Government have the eyes to see through these machinations? Anyway, China eventually yielded to economic blackmail ochestrated by the Bretton Woods Institutions and finally agreed to restructure the $6.5 billion of bilateral debt while the $4 billion owed to the Bretton Woods Institutions themselves remained intact, as well as the $3.5 billion owed to commercial lenders affiliated to Bretton Woods Institutions.
8. Am l advocating that Zambia should not do business with these Bretton Woods Institutions? Absolutely not. If we as a nation are going to thrive and prosper, then we need to do business with everyone, including the Bretton Woods Institutions themselves. But we need to know when to say no and when to say yes. We need to be shrewd. We need to constantly advance the interests of our nation. We need to stop believing that a foreign individual, entity, institution or nation can put the interests of Zambia above their own interests. We need to open our eyes and stop being naive. We need to remember that we live in an extremely shrewd world, and if we are going to demand and earn fair trade for our mineral and related resources, we need to adopt a posture of strategic arrogance similar to that adopted by Arabic countries which has enabled them to resist systematic exploitation by western countries thereby allowing them to earn a fair return for their oil wealth which has enabled them to gradually diversify their respective economies and bring prosperity to their people. Zambia can only be developed by Zambians. But again, we need to be wary of the fact that it is not every Zambian who has Zambia’s plight at heart. Some Zambians are sellouts and are only interested in lining up their pockets. Such Zambians should not be put anywhere near the management of our national affairs. If by some accident they have already been put there, then they must be removed at the earliest possible opportunity. Anyway, the Future is SET ✌️✌️✌️
///END
SET 26.06.2023