First because the IMF is acting far beyond its mandate; in fact, it is acting illegally; second, because the remedy of the present economic malaise in Zimbabwe lies within Zimbabwe itself; third, because resort to the IMF "remedies" will, for sure, worsen the social crises in the country; and four because the Government owes it to the people of the country to protect the dignity of a hard-won independence.

In this first instalment we shall deal with the first issue only.

Who makes policies in Zimbabwe ?

Major policy decisions and even pronouncements in Zimbabwe are sometimes made not by the responsible Minister or official, but by an official of the International Monetary Fund (IMF). Thus, for example, in early January 1999, it was Mr. Michael Nowak, the IMF's Programme Officer for Zimbabwe, who announced to the press that, among other things, Zimbabwe will pay for the lands taken over by it up-front and in cash, and will reflect the market value of the land. (Financial Gazette, 14 January, 1999). When questioned on this, the Minister of Finance, Mr. Herbert Murerwa, was not so definitive about this radical change in policy. Another official of the IMF, its head of Africa's department, Mr. Goodall Gondwe, announced that the Government would review the policy on price controls of basic commodities by the end of the season.

The IMF can say that these are decisions arrived at by the Government itself; that all its officials had done was to make them known to the press. This is a travesty of truth. It is a well-known fact that the IMF twists the arms of countries, especially financially vulnerable countries of the third world such as Zimbabwe in its present situation, to "persuade" them to take certain policy decisions even if these are contrary to the interests of the general population.

In fact, the "ownership" of decisions is a hotly debated issue within the IMF and World Bank circles. Officials in the IMF know that they have to force some unpleasant decisions on borrowing clients as part of their conditionalities. This could be in the form of a general policy strategy such as ESAP in Zimbabwe, or it could be on specific issues, such as the land question and the pricing system. Where the IMF derives these policy prescriptions is a question to which we shall come when, further down this essay, we look at what is called the "Washington Consensus". As we shall show these prescription are based on highly questionable assumptions. The point to note at this stage of the argument is that having "persuaded" the Government to take widely unpopular decisions, the IMF takes upon itself the task of making these known to the public. Here is what one of the historians of the IMF, Professor Harold James, says about the "scapegoat" function that the IMF consciously plays on behalf of weak governments.

"Weak governments like to be able to reduce the domestic pressure applied by interest groups and political parties by pointing to the need to respond to an alternative pressure coming from the outside. In the course of the 1960s, the IMF became accustomed to being used in this way as an external whipping boy or scapegoat." (Harold James, "From Grandmotherliness to Governance: The Evolution of IMF Conditionality," Finance & Development, December, 1998, p. 45)

So this is what, in fact, Messrs. Michael Nowak and Goodall Gondwe of the IMF were doing this December in Zimbabwe. If the population came out against the policy changes on land or on pricing of basic commodities, the Government can always point the finger to the IMF as the whipping boy, and hopefully, get away with it. This "drama" or circus discloses both the power of the IMF and the utter weakness of the Government of Zimbabwe.

Now we would show that the IMF is acting way beyond its mandate; in fact, it is acting illegally. It is interfering in the internal affairs of Zimbabwe, and undermining the sovereignty of the people of Zimbabwe. Also, under the guise of "curing" Zimbabwe's economic illness it is preparing to hand over the country to foreign interests and that too is illegal as well as illegitimate.

The illegality of IMF action in Zimbabwe

Under Article IV, Section 3 of its Articles of Agreement, the IMF has primarily a dual mandate: one is to oversee the international monetary system - this is at the global level; and the second, at national levels, it is to exercise surveillance over members' exchange rate policies. The main vehicle for national surveillance takes the form of regular consultations with member governments - known as Article IV consultations. When a weakness in financial sector contributes to a contraction of financial flows leading to Balance of Payments (BOP) problems, the IMF provides BOP support and technical advice on foreign exchange management. Article IV consultations are supplemented by periodic multilateral surveillance exercises, in particular those in connection with the IMF's World Economic Outlook, which is normally twice a year, and its annual International Capital Markets report. The IMF was never mandated, when it was founded at Bretton Woods in 1946, to interfere in the internal affairs of its members -- especially with their political, defence, and social policies. C. David Finch, former Director of the then Exchange and Trade Relations Department, put this aspect of IMF's limitations clearly when he said that the IMF

"… has not been established to give guidance on social and political priorities, nor has its voting system been designed to give it the moral authority to oversee priorities of a non-economic nature. Its functions have to be kept narrowly technical if it is to be effective in the exercise of its role as a promoter of the adjustment process. For this purpose, the Fund has to accept that the authorities of a country are the sole judges of its social and political priorities." ( C. David Finch, 1983, "Adjustment Policies and Conditionality," in IMF Conditionality, ed. by John Williamson, Washington: Institute for International Economics).

During the 1970s, certain member countries got concerned about the nature of "conditionalities" imposed by the IMF for its BOP support and other extended facilities. In 1979, therefore, the IMF Executive Board provided specific guidelines on conditionality. It said that the performance criteria specified in IMF programs should be "as few as possible". Section 9 of the guidelines stated that they would be

"… normally confined to (i) macro-economic variables, and (ii) those necessary to implement specific provisions of the Articles [the IMF's Articles of Agreement] or policies adopted under them."

Before the 1980s the IMF provided relief from BOP crisis at moderate socio-economic cost based on monetary and fiscal controls but not capital controls. Capital controls are specifically left outside of the IMF's mandate under Art VI of the Articles of Agreement. It is the members' responsibility to exercise such controls as necessary to regulate international capital movements. In fact, Art VI requires IMF to deny emergency credits "to meet a large or sustained outflow of capital".

Contrary to Art VI, however, the IMF has gone on to provide enormous amounts of "bail-outs" (running into billions of dollars) to countries in Latin America and East Asia, raising not only the question of its legality (under Art VI) but also its propriety, (the issue of moral hazard). In violation of this, the IMF has thus stood Bretton Woods position on its head -- from national capital controls to international financial bail-outs. The IMF might argue that this is a necessary evolution of its role in a changing international economy. That may well be; but such a change in its role is not backed by any legal authority. In fact, it has virtually reversed its role -- from helping to limit financial mobility, to facilitating it. In other words, the IMF is guilty of intensifying the financial volatility of the global economic system. Furthermore, contrary to its Articles of Agreement, the effect of IMF interventions is to undermine the national sovereignty of member countries. There is also now an increasing amount of evidence that the main effect (if not indeed the main purpose) of IMF's interventions has been primarily to serve the foreign policy goals of its most powerful member, namely, the United States.

The Politics of IMF Interventions

Mounting evidence now confirm that the IMF's interventions in Mexico and in East Asia, after their financial crises in 1994 and 1997 respectively, have not been to protect their national economies but to protect, primarily, the over-exposed American banking and financial interests. For example, in the case of Mexico, the IMF forced Mexico to retroactive write-up of tesebonos from peso into USD payment in order to protect American private capital. In East Asia, the IMF poured $120 billion for South Korea, Thailand and Indonesia, and, under pressure from the United States subverted Japan's offer of $100 billion fund to buffer Asian currencies.

Larry Summers, the power behind the throne in US foreign policy in economic affairs said: "In some ways the IMF has done more in these past months to liberalize these economies and open their markets to US goods & services than has been achieved in rounds of trade negotiations in the region." (see Larry Summers "American Farmers: Their Stakes in Asia, Their Stake in IMF," Office of Public Affairs, US Treasury Dept, Washington DC, Feb 23, 1998).

Even the London-based Economist, well-known for its conservative hard-line and pro-US sympathies, had to admit that IMF's Korea foray proves that it has become an "adjunct to US foreign policy". ( The Economist, 13 December, 1997, page 80). In Korea, the paper says, the IMF is seen not as rescuer but as tool of US and Japanese colonialism. (Ibid., page 14). It goes on to say that the USA also had a "big hand" in dictating IMF conditions for baling out Mexico and Indonesia (page 80). In the IMF, the paper concludes, it is "politics in command".

In more recent years, the IMF has taken a hard line on the issue of third world debt. Rescheduling of debt is now a diminishing option for most third world countries. Instead, the IMF is using the debt as a handle to open third world economies to commercial and capital markets. In compensation, and contrary to Art VI, it offers emergency credit to these countries putting them into further debt bondage.

The Washington Consensus and the Question of Responsibility

Earlier we raised the question of where the IMF and the World Bank derive their policy prescriptions. The answer is that they derive these from the dominant players in the international system, the G7 countries. And behind the G7 are their transnational conglomerates whose primary raison detre for existence is to capture more and more of the world's markets and world's resources.

But all this accumulation of profit is embellished by a "theory" -- the theory of the free market. We shall not get into debate on this issue, except to say that there has never existed, nor ever will, something called a "free" market. All markets are managed, and the most powerful managers of the markets (whether for diamonds or for tobacco) are the transnational industrial, financial and service-based conglomerates.

One aspect of this "theory", especially, as it is applied to "development economics" is the so-called Washington Consensus. Born in the early 1980s, in response to the contraction of GNPs and general decline in Latin America, this "consensus" has been the ruling orthodoxy of the World Bank and the IMF. It is under this orthodoxy that Zimbabwe's ESAP is crafted by the IMF officials. And it is under this orthodoxy that the Government of Zimbabwe's monetary, fiscal and foreign exchange policies, as well as its social policies, are structured under the behest of the IMF.

Now, nearly two decades down the line, some thinking members of WB/IMF intellectual fraternity are beginning to question the validity, and wisdom, of the Washington Consensus (WC). In a widely quoted Speech delivered on 7 January, 1998 at the WIDER Annual Lecture, Helsinki, Finland, Mr. Joseph Stiglitz, the senior Vice-President of the World Bank, put to serious question the Washington Consensus. The lecture was wide-ranging and challenging, but the gist of what Stiglitz had to say was that the WC-based policies were "incomplete" and often "misguided". He said that it overplayed the role of monetary and fiscal tools, and ignored the role of financial markets as destabilising force. It tended to downplay the importance of stabilising output and employment. He said that WC's various methods of controlling budget deficits "have drawbacks", and that there was no optimum level of budget deficits -- these depend on circumstances and the source of finance. For example, it was legitimate for developing countries to treat foreign aid as a source of finance to balance the budget. And so on. (Joseph Stiglitz, "More Instruments and Broader Goals: Moving Toward the Post-Washington Consensus").

Earlier we raised the issue of "ownership" of decisions made by, or in the name of, the Governments of third world countries. We saw that the IMF uses its financial muscle to "persuade" governments to adopt harsh policies that punish the general population, as ESAP is doing in Zimbabwe. We saw also that the policies of the IMF are crafted not in a political vacuum but consciously made in order to open the markets of the world to the dominant players, among whom the US is the most powerful player. We saw that this is all embellished by the IMF with a theory that is now seriously challenged as being "incomplete" and "misguided".

The next question is that of Responsibility: who is responsible for the damage that these policies cause to the people of Zimbabwe?

In the next instalment we shall argue that in surrendering its mandate for making economic policy to the "misguided" agents of the IMF, the Government has abdicated its moral duty to the people, and the duty to defend the sovereignty of the country; that it need not, and should not, do this; and that it is within the power and the responsibility of the people of Zimbabwe to sort out their own problems.

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