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51. Financing the Economic Stabilization and Growth Programme (Zambia Plus) in the Shadow of the IMF

Author:
Caesar Cheelo
Publication Date:
04-2018
Content Type:
Working Paper
Institution:
Hudson Institute
Abstract:
In February 2018, the IMF reaffirmed its August 2017 formal withdrawal from negotiations with Zambia over a package of financial support. The strong position to hold negotiations came in the IMF’s Article IV Consultations report of 2017, which concluded that Zambia was at high risk of debt distress, and that whilst financial management and fiscal discipline were improving, the extent of the improvement was not sufficient to mitigate the growing public debt and fiscal deficit. Whilst the IMF deal may be off the table for the time being, the many of problems that drove Zambia to engage the IMF most assuredly remain unresolved. Two to three years after the economic minicrisis of 2015, Zambia continued to accrue sizable new debts, to utilize the proceeds poorly (to fund consumption spending) and to run persistent fiscal deficits – albeit a smaller and seemingly better managed deficit in 2017 compared to 2015 and 2016. These issues remain problematic despite the partial economic rebound, with high copper prices, good rains (leading to good harvests and more reliable power supply), and a stable Kwacha providing a strong platform for improvement. Nonetheless, fiscal performance is lagging behind and Zambia may be missing a window to reestablish prudent public financial management.
Topic:
Infrastructure, Governance, Reform, Macroeconomics, IMF, and Public Debt
Political Geography:
Africa and Zambia

52. President el-Sisi's Second Term: The Challenge of Legitimacy

Author:
Ofir Winter and Khander Sawaed
Publication Date:
05-2018
Content Type:
Working Paper
Institution:
Institute for National Security Studies (INSS)
Abstract:
As expected, Abdel Fattah el-Sisi was reelected Egyptian president in late March 2018, this time, with 97.08 percent of the vote. More than affording an electoral mandate, the recent elections highlighted the incumbent president's challenge of legitimacy, which is reflected in two spheres. The first is the exacerbation of the internal splits within the ruling military establishment. The second is growing alienation between the ruling establishment and the general Egyptian public and civilian elements. The precarious state of the regime's legitimacy is a cause for regional and international concern. It may detract from the regime's ability to carry out the next stages of the economic reform sponsored by the International Monetary Fund, and will complicate efforts to obtain the cooperation in the war against terrorism by the local civilian population in the Sinai Peninsula. In the medium and long terms, the enhanced internal friction in the military and tension between the ruling establishment and civilian forces may jeopardize the country's stability. The legitimacy challenge also affects Egypt's relations with Israel. The regime needs broad public legitimacy in order to incur political risks, such as controversial decisions in favor of bilateral or regional cooperation with Israel. In addition, a regime with unsteady legitimacy might be tempted to adopt a populist anti-Israel line in order to strengthen its public standing. At the same time, the political situation in Egypt also provides an opportunity for increasing bilateral cooperation with Israel in areas contributing to the regime's legitimacy: the economy, security, energy, water, agriculture, and tourism.
Topic:
Elections, Democracy, Legitimacy, and IMF
Political Geography:
Africa, Middle East, Israel, and Egypt

53. Twenty Years of Morocco’s Development

Author:
Edward M. Gabriel
Publication Date:
03-2018
Content Type:
Journal Article
Journal:
The Ambassadors Review
Institution:
Council of American Ambassadors
Abstract:
Twenty years ago, I arrived in Morocco as the new U.S. Ambassador. It was the beginning of a close-up view of the changes going on in Morocco for the next two decades. During my first meeting with King Hassan II, shortly after my arrival, he wasted no time in addressing Morocco’s agenda with the United States, challenging me on our nation’s positions, especially in regard to his Kingdom’s existential issue regarding sovereignty over the Sahara. This unexpected candid and warm exchange set the tone for regular meetings throughout my tenure during which concerns and grievances were voiced in private, rather than aired publicly. King Mohammed VI would continue this practice with me after his father’s death. My first few months in the country also coincided with the beginning of the first government of Alternance, led by opposition leader Abderrahmane El Youssoufi—a watershed moment for Morocco that many political analysts mark as the beginning of significant democratic reform and economic liberalization in Morocco after years of a strong-armed approach to governing and limited civil rights. Abderrahmane El Youssoufi, whose political activities had previously resulted in two years in jail and then 15 years of exile, became Prime Minister after his party, the Socialist Union of Popular Forces (USFP), won the most seats in the November 1997 elections. Since then, the international community has confirmed Moroccan elections as occurring in a fair and transparent manner. In 1998, the unemployment rate in the country was 17 percent and growing, with youths making up a disproportionate percentage of the population. Women lacked equal rights with men. The percentage of the population living at or below the poverty line for lower middle-income countries was around 28 percent, and more than half of the entire adult population was illiterate, with rates among rural women much higher. Electricity in the country reached only around 60 percent of the population, and almost a quarter did not have access to potable water. Infant mortality rates were 23 percent higher than the regional average, and maternal mortality ratios were nearly double the regional average. Overall, the micro-economic picture was in dire shape. The economy was too dependent on agriculture, accounting for 20 percent of gross domestic product (GDP) and heavily reliant on rainfall. Infrastructure was lacking throughout the country, and environmental degradation was widely apparent throughout the cities and the countryside, presenting a challenge to the growth of tourism. Of particular note, the northern part of Morocco was completely neglected after a series of militant actions created an irreparable rift between King Hassan and his citizens there. In contrast to the micro-economic indicators, by 1998 King Hassan had established a strong macro-economic climate: a low ratio of debt to GDP, a low budget deficit and an open, competitive economic system. He adopted International Monetary Fund (IMF) and World Bank reforms that, had Morocco been a member of the European Union, would have qualified it for inclusion in the Monetary Union. Upon his death in 1999, King Hassan left the country unified, with a very strong nationalistic belief in country and King, a reasonably performing economy and, most important, with a solid commitment in its support for U.S. objectives regarding counterterrorism and economic openness, and in promoting peace in the Middle East. Twenty years later, where is Morocco today? Where is it headed tomorrow?
Topic:
Agriculture, Development, Diplomacy, Education, Democracy, Decentralization, and IMF
Political Geography:
Africa, United States, North Africa, and Morocco

54. Restoring Debt Sustainability in African Heavily Indebted Poor Countries

Author:
Cyrus Rustomjee
Publication Date:
06-2018
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation (CIGI)
Abstract:
Debt sustainability among the 30 African low-income countries that previously received debt relief has deteriorated sharply. More than one-third are either back in, or at high risk of, debt distress. Outcomes of the 2017 review of the International Monetary Fund and the World Bank Debt Sustainability Framework for Low-Income Countries and improvements in country-specific debt sustainability assessments can help strengthen the diagnosis of debt vulnerability and improve the quality of policy recommendations respectively.
Topic:
Debt, Poverty, Sustainability, and IMF
Political Geography:
Africa

55. Fiscal Space: What Is It? Who Has It? When to Use It?

Author:
James A. Haley
Publication Date:
08-2018
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation (CIGI)
Abstract:
This paper reviews the concept of fiscal space, or the capacity to deploy fiscal stimulus should it be needed; identifies the key factors that determine its size; and discusses considerations relevant to its use. The paper is motivated by the remarkably rapid mobilization of fiscal stimulus in the 2008-2009 global financial crisis, coordinated by the International Monetary Fund (IMF), which was followed by the equally remarkable rapid adoption of austerity in key advanced economies. This switch from stimulus to austerity occurred despite the languid pace of the global recovery, in which growth was, as subsequently described by IMF Managing Director Christine Lagarde, “too low, for too long.” At the time, the change was justified in terms of concerns over large debt burdens and diminished capacity for future action. Curiously, however, the principled voices defending the interests of future generations were silent with respect to more recent tax cuts and the adoption of higher budgeted spending.
Topic:
Budget, Fiscal Policy, IMF, and Stimulus
Political Geography:
Global Focus

56. Shipping and Climate Change: International Law and Policy Considerations

Author:
Aldo Chicop, Meinhard Doelle, and Ryan Gauvin
Publication Date:
09-2018
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation (CIGI)
Abstract:
This report investigates the international law and policy challenges to the determination of the international shipping industry’s contribution to climate change mitigation efforts through the International Maritime Organization (IMO), a specialized agency of the United Nations and the competent international organization with respect to shipping in international law. The report sets out the international legal framework that serves as the context for the IMO initial strategy, the challenge of regulating greenhouse gas (GHG) emissions from international shipping, and the process and issues in determining the industry’s “fair share” of mitigation efforts and potential legal pathways. The report concludes with general, policy and legal considerations that have a bearing on the current and possible future directions of the nascent IMO strategy. General considerations include the observation that the complexity and uncertainty underscoring the development of the IMO strategy call for a long-term planning instrument that is integrated and systemic in scope, flexible in approach and adaptive in application. As other regimes and sectors progress in developing and delivering on mitigation efforts, care should be exercised in considering lessons and tools from other sectors for application to shipping, given its uniqueness and that other sector experiences emanate from different contexts and considerations. Given continuing significant differences on GHG issues in the IMO, it is vital for the long-term IMO strategy to be advanced and maintained on the basis of the culture of consensus that has helped shape the IMO as a successful regulatory body.
Topic:
International Law, United Nations, Policy Implementation, IMF, and Shipping
Political Geography:
Global Focus

57. Reversing Zambia’s high risk of debt distress

Author:
Florence Banda-Muleya and Shebo Nalishebo
Publication Date:
08-2018
Content Type:
Working Paper
Institution:
Zambia Institute for Policy Analysis and Research (ZIPAR)
Abstract:
A load of unsustainable debt hangs heavy over Zambia. Zambia is part of a list of 25 low income countries considered at high risk of debt distress in 2018. Government’s efforts to reduce the country’s infrastructure gap as well as bring down poverty and inequality have resulted into large spending overruns, a growing subsidy bill and a substantial public sector wage bill over the last five years. Alas, domestic revenues remained low and stagnant. So Government resorted to massive external borrowing to finance arguably unsustainable expenditure. This approach to spending pushed borrowings to about 59% of GDP as at end of 2017, which is in the territory of unsustainable debt levels. In October 2017, the IMF issued a red flag that Zambia was at high risk of debt distress, implying that the country was likely to breach the thresholds for debt and debt service indicators and, should it continue on the same trajectory, it would likely default on its debt service obligations. This high debt has consequences for growth and poverty reduction efforts. Increased domestic borrowing by Government from October 2015 resulted in reduced lending to the private sector as businesses and Government competed for credit, and thereby hampered economic growth. Further, with interest payments reaching 23% of domestic revenues and personal emoluments as high as 54% of domestic revenues in 2017, other priority spending as well as spending on social protection were crowded out, thereby hampering efforts to reduce poverty. This was despite the removal of fuel and electricity subsidies in 2017, whose savings did not result in a corresponding increase in spending towards poverty reduction and empowerment programmes. Additionally, the high debt has made future borrowing more risky and more expensive, limiting opportunities to borrow, to invest or restructure debt going forward. Zambia’s surging public debt is largely skewed towards costly commercial external debt due to issuing Eurobonds and increased export and suppliers’ credit. This poses significant repayment and currency risks. The bullet repayment structure of the first two Eurobonds means that the principal will have to be repaid at the end of the term of each loan in 2022 and 2024. Significant risks are thus faced as the country is ill-prepared to make such lump sum payments. Further, interest payments are payable in US dollars, so when the local currency depreciates substantially (as it did in 2015), the cost of servicing this debt increases. Moreover, while average interest rates on Eurobonds seem low at around 8%, the effective borrowing costs (interest rate plus average annual rate of depreciation) averaged 26% in 2016.
Topic:
Debt, Development, Infrastructure, Economic Growth, IMF, and Public Debt
Political Geography:
Africa and Zambia

58. Dossier 10: Argentina Goes Back to the IMF

Author:
Tricontinental: Institute for Social Research
Publication Date:
11-2018
Content Type:
Working Paper
Institution:
Tricontinental: Institute for Social Research
Abstract:
For six months, Argentina has been confronted with a new economic and social crisis on a massive scale. In the context the devaluation of local currency, rising inflation, and a deep recession, Mauricio Macri’s administration struck an agreement with the IMF, marking a major shift in the country’s future. The agreements slash public spending and prioritize the repayment of debt, among other measures. This dossier examines the different dimensions of the crisis, the open disputes, and the possibilities for the immediate future.
Topic:
Economics, International Cooperation, Neoliberalism, Protests, IMF, and Political Crisis
Political Geography:
Argentina and South America

59. Following the Money in Ghana: From the Grassroots to the Hallways of the IMF

Author:
Abdulkarim Mohammed
Publication Date:
12-2017
Content Type:
Special Report
Institution:
Accountability Research Center (ARC), American University
Abstract:
Between 2011 and 2014, Ghana went from boasting the world’s fastest growing economy to requiring a bailout from the International Monetary Fund (IMF). While a global downturn in commodity prices precipitated the fall, a lack of accountability in how public finances have been managed has been at the heart of the problem. Fiscal indiscipline, fueled by a lack of oversight and rampant corruption, left the government unable to mount an effective response during lean economic times. Oxfam and its civil society partners in Ghana were worried that everyday Ghanaians would be left shouldering the burden of the economic crisis. Moreover, Ghanaians worried that their concerns and aspirations would not be represented in the high-level negotiations on the bailout between the Government of Ghana and the IMF. To address these concerns Oxfam and its partners coordinated a multi-level advocacy campaign. The campaign drew together a diverse coalition of civil society—from community activists to globally influential think tanks—able to represent and articulate local level concerns and project a united voice at the national and global levels. This novel approach proved highly successful in driving important changes in policy and practice that have enhanced accountability, fiscal responsibility, and citizens’ participation. The campaign not only contributed to improving the laws governing how public finances are managed in Ghana, but also helped to increase pro-poor spending and protect crucial social services.
Topic:
Civil Society, Corruption, Accountability, Social Services, Participation, IMF, Oversight, and Public Spending
Political Geography:
Africa and Ghana

60. Is IMF Tax Policy Progressive?

Author:
Oxfam Publishing
Publication Date:
10-2017
Content Type:
Commentary and Analysis
Institution:
Oxfam Publishing
Abstract:
The IMF has significant influence on the tax policies of developing countries through advice and conditionality, technical assistance and by setting global standards and analyzing global trends. Its rhetoric has become more progressive in recent years. This paper assesses the IMF’s tax advice to developing countries based on five country case studies (Ghana, Mozambique, Nicaragua, Peru, Senegal) over the period 2010 to 2015 and supported by a desk study of public IMF documents. It finds that there is a gap between the IMF’s commitment to leveraging fiscal policy to fight inequality, and its actual tax advice to developing countries.
Topic:
International Cooperation, Inequality, Tax Systems, IMF, and Progressivism
Political Geography:
Africa, South America, Nicaragua, Mozambique, Senegal, Peru, and Ghana