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IMF accused of exacerbating famine in Niger

12 September 2005

The IMF’s external relations department has spent the last two months furiously rebuffing charges that the Fund has exacerbated famine in Niger. The debate centres around the impact of structural adjustment measures and accusations that donors initially refused to allow the government to distribute free food to affected areas.

Niger is the second poorest country on the planet, with nearly a third of its 12 million inhabitants endangered by the food shortage. Despite prior warnings from aid agencies of an impending food crisis, IMF director Rodrigo de Rato, in a May visit to the country, praised president Tandja and his cabinet “for their ongoing reforms to strengthen economic growth and reduce poverty”.

Johanne Sekkenes, who leads Medecins sans Frontières in Niger, believes that the IMF and EU pressed Niger too hard to implement a structural adjustment programme: “No sooner had the government been re-elected [this year] than it was obliged to introduce 19 percent value-added tax (VAT) on basic foodstuffs. At the same time, as part of the policy, emergency grain reserves were abolished.” Under the letter of intent signed between the IMF and the Nigerien government in January to receive funding under a Poverty Reduction and Growth Facility (PRGF), Niger agreed to extend VAT to milk, sugar and wheat flour, and reduce VAT exemptions on water and electricity consumption.

a major factor in the incapacity of authorities to respond to the health crisis provoked by the famine

Thomas Dawson, the IMF’s director of external relations, protested that “IMF staff specifically recommended that a poverty impact assessment of the proposed measures be carried out [which was not carried out]. At any rate, the VAT extension was soon rescinded because of public protests and could have had little effect on the crisis.” Month-long mass mobilisations forced the government to withdraw the VAT from milk and flour, and only reduce VAT exemptions to large-scale consumption of water and electricity.

On the question of grain reserves, Dawson said that the “IMF has never supported or encouraged the abolition of government grain reserves. In fact, the grain reserve is in place and has been used, to the best of our knowledge, to relieve the current food shortage.”

Unclear is the cumulative role of tight IMF macroeconomic strictures on the government’s ability to cope with the crisis. Under the agreement with the IMF, an increasingly tight rein has been kept on inflation levels and fiscal deficits. Niger has seen its debt service rise from 16 per cent of GDP in 2001 to 24 per cent in 2003, before falling back to 15 per cent in 2005 (after receiving debt relief upon reaching HIPC completion point in April 2004). The debt campaign group CADTM has argued that debt repayments have crippled health sector spending: “the degradation of Nigerien health services is a major factor in the incapacity of authorities to respond to the health crisis provoked by the famine.”

The second controversy centres around the distribution of free food to famine-affected areas. In August, UK weekly The Observer stated that the “the Niger government, under instruction from the IMF and EU, at first refused to distribute free food to those most in need”, saying that “the powers that be did not want to depress the market prices that benefited wholesalers and speculators.” Abdoulaye Bio-Tchané, IMF African department director, defended the Fund: “there is absolutely no truth to the suggestion that IMF policy advice has impeded free food distribution”.

The controversy opens old wounds for the Fund which has faced similar accusations about its role in recent famines in Malawi and other southern African countries (see Updates 30, 29). Many commentators believe that the full liberalisation of the agriculture sector under Bank and Fund advice was a major cause of food crises in those countries.