Analysis: IMF returns to a mixed reception

With an economy reeling under the collapse in oil prices and states struggling to pay workers’ salaries, Nigeria’s political elite might be expected to grasp any chance of outside financial assistance.

So it was somewhat surprising that finance minister Kemi Adeosun casually brushed aside the idea that the International Monetary Fund might return as a white knight, offering money and certainty to a country where both are lacking.    

“Nigeria is not sick and even if we are, we have our own local remedy,” Adeosun maintained.

If sickness is the precondition for a return of the IMF, Africa currently resembles an overcrowded hospital wing. Among the patients already in care are Angola, which last month requested a $1.5bn programme, Zambia, in talks over an aid programme, and Ghana, which last year signed an agreement with the fund. All are primary commodity producers, laid low by a sustained decline in global demand emanating largely from China’s slowdown.

Yet if the IMF is once again in the ascendancy, calling the shots and disbursing support, why is Nigeria – a country many observers acknowledge to be deeply troubled – so immune to its charms? One reason is the enduring stigma attached to dealings with the fund. John Ashbourne, Africa economist at Capital Economics, argues that going “cap in hand” to the fund is still viewed as a sign of policy failure – and a red rag to markets that things are going seriously awry.

Secondly, the IMF’s previous rigid adherence to spending cuts and major structural reforms – crucial ingredients in the so-called ‘Washington Consensus” – have left the fund with a toxic legacy on the continent. The fund’s insistence on painful economic reforms has made it deeply unpopular among governments and citizens alike.

Most countries prefer to deal with China, which demands fewer conditions and policy reforms in return for loans. While Adeosun was playing down the prospect of an IMF bailout, President Buhari was in Beijing heralding some $6bn of new financial support for Nigerian infrastructure projects. Unlike support from the IMF, Beijing’s largesse is still viewed in broadly optimistic terms.

Yet much as African countries prefer Beijing’s laissez-faire approach, several factors combine to make the IMF’s role indispensable. As the Chinese economy struggles, the days of no-strings-attached support from Beijing are slowly but steadily drawing to a close. Under pressure from policymakers, Chinese bankers are keen to ensure that African loans offer worthwhile commercial returns. While promises of support to Nigeria may ultimately be realised, lenders are far less willing to chance their hand with the likes of Angola and Zimbabwe.

With Chinese credit lines exhausted, African economies in urgent need of support view the IMF as their only option. Zimbabwe, long viewed as a financial pariah after a raft of unfriendly policies, is desperate to seal a deal with the IMF which it believes will not only offer much needed funds but also help to end its isolation with international investors.

Could this be the start of a new chapter in relations between Africa and the IMF? Signs of tension are already emerging. Last month, the fund withdrew support from Mozambique after the country attempted to hide $1bn in debts. The incident shows that IMF demands for total transparency are unlikely to go away anytime soon.

Yet in other areas, the fund is learning from its unpopular decisions. Ashbourne says that the IMF’s deal with Ghana shows a new acceptance for pro-poor policies that the fund might have rejected out of hand in the 1980s and 1990s. This newfound humility – coupled with Africa’s urgent need for cash – could help forge a new consensus free from the mutual mistrust of the old.

David Thomas