Dear Basil,
I did not mean in my piece to libel the integrity of your colleagues at the
Central Bank. I beg your pardon in that respect. I know that a lot of them
(including you) are very professional. In fact, I used to say that the Bank
was the most professional institution back home. Unfortunately, as you
attest to in your piece, the most hardworking are usually not the policy
makers. I know of some situations where policy makers would sanction the
sale of foreign currencies in order to reflect more palatable figures to IMF
missions even if that is not in the long term interest of the ordinary
Gambians. To me, those figures are questionable. Anyone familiar with our
Customs Department will also know that their records do not truly reflect
the flow of goods in the Gambia. Yet, Central Bank staff collected these
figures and base some of their analysis on them. Collection of data
regarding foreign exchange rates was also questionable. Again, I don't want
to be seen as bashing those hardworking economists. As a matter of fact, the
reserves were in the region of $79 million (I think around 9 months cover)
towards the end of the 80s. So you are right, they did a hell of a job in
that respect.
As far as IMF bashing is concerned, am not alone in doing that. I was just
giving a Gambian perspective. Hamjatta's piece eloquently put the role of
the IMF in developing countries into perspective. No one doubt that they
recruit from the best schools around the world. But does that translate to
good policies for us? About them gleaning the numbers over coffee, I was
just dramatizing a situation and I stated it in the context of when they are
met at the airport with the papers and later taken to their hotels. It is a
fact that they are met with the papers at the airport. It is also a fact
that the idea is for them to read the material in order to prepare for their
meetings the following day. So I don't know why you have a problem with that
statement. Forgive me for stating that they were drinking coffee. Am glad we
agreed on the interest rate problem and the fact that those Oxbridge
graduates did not do something about it. I don't think the actions of the
IMF in the Gambia and elsewhere in Africa can be defended by simply saying
that they recruit people from Ivy League schools and they host economists
from the Gambia when they come to Washington for training purposes. Knowing
theories and high sounding economics jargons is one thing, but having the
interest of the Gambians at heart and the will to advocate meaningful
changes is a totally different matter. I would be glad to hear about areas
where IMF policies positively impacted the poor people of The Gambia. I will
go back and read some of your postings on this topic.
Like I said, I grant you points for building up the reserves (which mainly
came from handouts from rich countries) just for it to be squandered by Yaya
and his bunch of thieves. But talk to us about policies that put food on the
mats (tables) of farmers and policies that give people, downsized as a
result of privatization, other alternatives. You seem to insinuate that the
IMF and economists in the Gambia might have given out some right advise
which the politicians did not implement. If that is what you are saying, I
hope I will find in your postings examples illustrating that point. Until
then, I will stick to my humble opinion that the government (economists
included) were blindly implementing IMF and World Bank policies without
having the guts to question their wisdom in the Gambian context. Maybe they
were intimidated by their degrees.
Although it has very little to do with this topic, I will say that WE HAVE
TO REMOVE YAYA BY ANY MEANS NECESSARY, so that we can benefit of the wisdom
of people like you and avoid another April 10 massacre. I promise myself
that I will do my little part to always remind everyone (including myself)
that that is the real battle at hand.
KB
>From: "B.M.Jones" <[log in to unmask]>
>Reply-To: The Gambia and related-issues mailing list
><[log in to unmask]>
>To: [log in to unmask]
>Subject: Re: Reply to Kebba Dampha
>Date: Tue, 9 May 2000 15:20:08 +0100
>
>Hi Kebba,
>
>Your discourse on the IMF missions to the Gambia as
>ineptitude and the allegations that the Central Bank of the
>Gambia issue them with numbers that are fabricated cannot
>be further from the truth.
>
>I have to defend the integrity of my colleagues at the
>Central Bank and also to point out some of the inaccuracies
>in your assessment of the IMF missions to the Gambia. I
>have been with the Research Department of the bank since
>1987 and have been actively involved in IMF missions and
>article IV consultations with the government. There have
>been instances when i personally coordinated the collection
>of statistics for fund missions. One thing that you cannot
>do is to question the professionalism and dedication of the
>IMF staff.
>
>You alluded to some of these points that are inaccurate
>(i) I think it is wrong and erroneous for you to say that
>they are given bundles of paper to glean through as they
>sip coffee in their five star hotels. If you know anything
>about article IV consultation and the preparation of
>letters of intent which goes through an exhaustive
>discussion process involving the Governor of the Bank and
>the SOS for finance, you will realize the hard work and the
>time constraint conditions that people work under to get
>there documents ready.
>
>(ii) as an economist with the central bank, I want to
>challenge you for evidence of instances where the
>statistics are fabricated. I want do defend the integrity
>of my colleagues. Apart from that, when we conduct a
>financial program for the Gambia, there are consistent ways
>of checking the accuracy or otherwise of the data. All
>statistical data are prone to discrepancies. But to
>outright say that the figures are fabricated is a
>disservice to the people back home who are working hard to
>make a difference in the economic management of the nation.
>Their advice might not be heeded by the politicians but as
>far as i know, they are doing a damn good job.
>
>(iii) I also want to challenge your assertion and surely
>your memory does not serve you right that they spend five
>working days in the Gambia every quarter. The frequency of
>IMF mission depends on the program that countries have with
>them and on the severity of the economic disequilibrium.
>They are mandated to visit at least once even if a country
>does not have a program with them for the annual article IV
>consultation with the Gambian authorities.
>
>IT IS ONE THING TO DISAGREE AND QUESTION THE VALIDITY AND
>DESIRABILITY OF IMF PERFORMANCE CRITERIA AND POLICY
>PRESCRIPTION TO ACHIEVE MACROECONOMIC STABILITY, BUT WHAT
>YOU CANNOT DISTORT IS THE PROFESSIONALISM AND WEALTH OF
>KNOWLEDGE OF IMF STAFF. You have to agree that they employ
>"la creme de la creme" of economist from the "top"
>economics departments.
>
>Yes they always stay at Kairaba beach hotel, but I can
>attest to the fact that they work 24-7 for two weeks to
>review all relevant piece of information and hold
>discussions with all operators in the economy. One thing I
>learned from IMF staff as an economist is how to prepare
>a flow of funds table for the Gambia in which we look at
>all the sectors of the economy, the real sector, the
>monetary sector, the external sector and the fiscal sector.
>IMF mission spend their time trying to come up with the
>interrelationships between the various sectors and see
>where the imbalances lie. It is from these imbalances that
>they come up with policy prescriptions WHICH I DO NOT
>ALWAYS AGREE WITH AS THERE ARE ALTERNATIVES.
>
>I don't know what your knowledge is of the economy before
>1985 when the country had external reserves worth only two
>weeks of imports and how the situation has since improved
>whereby we now have reserves worth about 5-6 months of
>import cover. I will attribute this and other macroeconomic
>achievement to the regular and constant consultation and the
>foresight of the Late Sheriff Sesay who pioneered the
>program. My position has always been that we have made
>significant strides in terms of macroeconomic management,
>the problem with the Gambian economy has always been to
>translate these macroeconomic gain to the microeconomic and
>household level in terms of poverty reduction and
>improvements in standards of living. (If you read some of
>my posting on the L my position on this is very clear)
>
>You also alluded to the interest rate problem in the
>Gambia. You are right it is excessively high and
>discourages domestic borrowing for productive investment.
>It is only the re-export sector (imports for reexport which
>does not add to domestic production) that is profitable at
>interest rates of 23%. Infact the latest figures I've seen shop
> a declining trend. To solve the problem, the government
>has to get its finances in order and there is more
>competition in the banking system. We cannot expect the
>economy to be producing goods and services when the high
>interest rates discourages investment. One reason for the
>high interest rate is to keep a tight lid on inflation.
>(another story that i will not go into). Economic
>management is not just about interest rates. There is more
>to it than that.
>
>While people may disagree fundamentally on the policy
>prescription of the IMF which is based on demand management
>- reducing aggregates demand in the economy where you reduce
>government expenditure, charge for hospital prescriptions,
>redundancy and privatization, the IMF belated have come to
>the realization that their policies has not been growth
>enhancing. This is why for the first time they have a
>poverty reduction and growth facility (PRGF) that addresses
>long term growth.
>
>The economists in the Gambia have benefited in terms of
>human capacity building from the IMF to develop local
>capacity in the management of the economy. It is one thing
>to provide the right advice but it totally a different ball
>game for the politicians to implement the right policies.
>In the final analysis, the have the last say.
>
>
>Basil
>
>
>
>On Mon, 8 May 2000 14:38:42 EDT Dampha Kebba
><[log in to unmask]> wrote:
>
> > Hamjatta,
> > Thanks for an excellent piece of work. After reading this, I cannot help
>but
> > wonder why you at times waste your precious brain cells arguing with
>some of
> > the people on the list. I feel really proud reading this. I can attest
>to
> > the observations made in your piece about the ineptitude of these "IMF
> > Missions". When they would come to The Gambia during the Jawara era,
>Central
> > Bank drivers would meet them at the airport with the "numbers" you
>alluded
> > to. They would be driven to the "five star hotels" with bundles of
>papers
> > which I presumed they gleaned as they sipped their coffee. The next
>morning
> > they would arrive at the Central Bank and conduct series of meetings
>where
> > they would be presented with more "numbers" (some of which were
>fabricated).
> > They would go to places like the ports authority, customs and albert
>market
> > (to gather information on exchange rates) before retiring to their
>luxurious
> > hotels. If my memory serves me right, I think they used to spend five
> > business days (at most) in The Gambia every quarter.
> > In my humble opinion (as a non-economist, too) I thought one of the most
> > serious economic problems we had then (and I think we still face)
>pertained
> > to the interest rates commercial banks were charging for their loans.
>The
> > interest rate spread we had was ridiculous. You had commercial banks
>paying
> > 5-8% to depositors and charging their customers 23% for the loans they
>give
> > out. At the same time, The Central Bank and the Government Treasury were
> > paying 15% on their Central Bank bills and Treasury bill, respectively.
>So
> > right there, the commercial banks had no incentive to lend money to
>ordinary
> > Gambians. And in the few cases where they lent money to businessmen in
>The
> > Gambia, they were just encouraging inflation because these businessmen
>would
> > want to price their goods high enough in order to be able to afford the
>high
> > interest rates. But just like you suggested, instead of tackling
>problems
> > like these and many more peculiar to The Gambia, these so-called
>economists
> > will come with their Washington Consensus (paracetamol) prescriptions
>and
> > give us the same pills they would give to a country like Ghana.
> > As you so eloquently demonstrate, a lot of the blame for these economic
> > problems we face, rest right at the doorsteps of these mammoth
>institutions.
> > But some of the blame for the 'hot money' phenomenon also need to go to
>the
> > private banks that lend out the money and some of the corrupt
>governments
> > that help attract this money. Everyone should know that when high
>interest
> > yielding short term deposits are used to finance long term real estate
> > loans, this is a recipe for disaster. The governments and their citizens
> > that accepts these deposits and the big banks that give them the funds
>both
> > know that this is a problem. However, the banks (mainly U.S.
>multinational
> > institutions) know that the U.S. would not stand by and watch while they
> > collapse. They know the U.S. will use it's weight and ensure that the
>IMF
> > bail them out of their risky (highly profitable) ventures in these
> > developing countries. IMF always come in the guise of bailing out the
> > developing country. When in actual fact, they are bailing the Chase
> > Manhattans of this world and their depositors; and by extension, the
>U.S.
> > financial system. I say, since these banks reap all the benefits if
>these
> > risky loans come through, they should face the music if the corrupt
>finance
> > ministers of Mexico cannot make good on their obligations.
> > A lot of blame also has to go to the countries that try to attract these
> > forms of financing and end up using the money on the wrong projects. At
> > best, they show a lack of understanding of these types of financing.
>Worst
> > still, the borrowers of 'hot money' are usually only interested in their
> > immediate goals and have no regard whatsoever for the long term economic
> > well being of their countries. I recognized that the focus of your
>article
> > was not an exhaustive diagnosis of the 'hot money' issue, but I just
>thought
> > I mention that we in the developing world also should share part of the
> > blame.
> > Again, I salute you for your excellent piece and this just helps to
> > reinforce my belief that WE MUST GET RID OF YAYA BY ANY MEANS NECESSARY,
>so
> > that people like you will be in a better position to contribute to the
> > development of our beloved country.
> > KB
> >
>
> >
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> > >Web interface at: http://maelstrom.stjohns.edu/archives/gambia-l.html
> > >
> >
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>B.M.Jones
>[log in to unmask]
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