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Monday, 26 July 2010 14:17

IMF: INCREASING SDR CAN BENEFIT AFRICA

Economic perspective and analysis by Emeka Chiakwelu

 

International Monetary Fund (IMF) will substantially increase its Special Drawing Rights (SDRs) from its lower original reserve to 204 billion which is proportionate to $324 billion. In the last G-20 summit held in America, the members of this important group of the largest economies gave the IMF the green light for creation of significantly larger SDRs.



SDR is a form of proxy or representative currency created by IMF. This "quasi currency" can be converted into four established and chosen currencies referred as "basket of currencies" - dollar, euro, pound and yen. Every member-nation of IMF has a holding according to the stake they have in the institution and the holdings are allocated the so-called SDRs.


According to IMF, "The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries' official reserves. Its value is based on a basket of four key international currencies, and SDRs can be exchanged for freely usable currencies. With a general SDR allocation that took effect on August 28 and a special allocation on September 9, 2009, the amount of SDRs increased from SDR 21.4 billion to SDR 204.1 billion (currently equivalent to about $324 billion)."




America and the rest of Group -20 nations supported the increment because the poor and developing nations who were severely impacted by global recession can have access to liquidity. This can relief the credit crunch and aid in reviving the global economy.



The African nations can benefit from the readily availability and increment of reserve asset of IMF. But African nations are skeptical about IMF and its role as lender of last resort. African experience in 1980s with IMF left a bad taste in their mouths, when the cash strapped African nations turn to IMF for credit. It became a disaster for Africa and the consequences of Africa's entanglement with IMF sow the seed for economic depression in today's Africa.




IMF‘s conditional ties for loans were so stringent for these nations to swallow. It was called structural adjustment programs which will supposedly reform the economies. The pathways to IMF’s structural adjustment initiative were paved with hardship and misery. These nations, poor nations of Africa were compelled to cut their spending drastically without putting into consideration the suffering of the masses especially women and children. On the wise counsel of IMF and its Ivy League experts African nations devalued their currencies on the grounds that it will increase export. They failed to see that most African nations are not producing anything but relied on agricultural crops and donors to finance their budgets. With the devaluation the price of crops decline sharply on the international market and Africa’s yoke enhanced.



Those African nations that finally got loans and credits could not pay it back. This became the genesis of the famous African foreign debt which has become a manacle on Africa.
Therefore with this SDR: "All the IMF's 185 members would get more SDRs in proportion to their stake in the IMF. Wealthy countries that don't need the SDRs may be able to lend them to poor nations that do." This can benefit Africa.





SDR for Settlement of debts


Instead of the highly indebted African nations using their hard currencies to pay for their foreign debts, I will suggest the use of SDR to repay the lingering foreign loans. Africa received $540 billion loans from 1970-2002, she paid back $550 billion and she still owned $295 billion as at the end of 2002.






"The countries of sub-Saharan Africa are generally very poor, and the burden of servicing their foreign debt is often insurmountably heavy. On the average, African countries owe 46% of their foreign debt to official bilateral lenders, 32% to multilateral institutions, and 22% to private creditors. However, most of their debt payments (57%) go to private creditors, while multilateral creditors receive 21% and bilateral creditors22% of the total. Little of the bilateral debt is owed to the United States. In recent years, multilateral agencies and bilateral creditors have forgiven substantial amounts of debt, in order to reduce the poor countries’ debt burden to "sustainable" levels. However, debtors many still have difficulty servicing their debts. There have been calls for 100% forgiveness of multilateral debt. Many analysts suggest, however, that such forgiveness could substantially limit the ability of the multilateral agencies to provide future aid."





"External debt Despite the HIPC Initiative's objective to reduce Africa's total debt, total external debt and the burden of debt service payments still remains high. In 2003 African countries owed a total of US$307 billion to creditor countries and institutions, of which $218 billion was owed by the countries in Sub-Saharan Africa. This debt more than doubled from US$120 billion in 1980 to US$307 billion in 2003. Almost 80 percent of Africa's debt is owed to official institutions, of which approximately 33 percent is multilateral debt owed mainly to the IMF and the World Bank. At the same time, total debt service paid by the continent increased from US$3.3 billion in the 1970s to a peak of US$28 billion in 2003, of which Sub-Saharan Africa's share was US$15 billion. In this context, the decision by the G8 countries to grant a 100 percent multilateral cancellation of the debt owed to the IMF, the World Bank, and the African Development Bank by 14 African countries that have reached the HIPC Initiative completion point could reduce the heavy debt burden and boost pro-poor growth by freeing resources for social and productive sectors."






Therefore SDR can become a powerful instrument to wipe out all the African debt. IMF can create more SDRs and issue an allocation specifically for debt payment without triggering global inflation. With total debt settlement African people can use their resources, talents and energy to engage in more resourceful initiatives rather than campaigning endlessly for debt forgiveness.




SDRs can come to the rescue as instrument to payoff African debts. Then funds for servicing and paying debts will be invested in healthcare, education and other areas that need immediate attention in the continent.




Image result for emeka chiakweluMr. Emeka Chiakwelu is the Principal policy strategist at Afripol Organization. Africa Political and Economic Strategic Center (Afripol) is foremost a public policy center whose fundamental objective is to broaden the parameters of public policy debates in Africa. To advocate, promote and encourage free enterprise, democracy, sustainable green environment, human rights, conflict resolutions, transparency and probity in Africa.    www.afripol.org
e-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

 

 

 

 

 

Published in Emeka Chiakwelu

Witney W. Schneidman, an adviser on African affairs to President Barack Obama during the Presidential campaign spelled out Obama's cardinal policy objectives for Africa:

"Barack Obama will pursue three fundamental objectives on the continent. One is to accelerate Africa's integration into the global economy. A second is to enhance the peace and security of African states.
And a third is to strengthen relationships with those governments, institutions and civil society organizations committed to deepening democracy, accountability and reducing poverty in Africa."

( http://www.afripol.org/Obama.htm)

Nigeria is the epicenter of African geo-politics, therefore a stable, healthy and prosperous Nigeria is good for Africa and the world. Nigeria is the most populous nation in Africa: Politically, culturally, economically and otherwise, resourceful South Africa notwithstanding, Nigeria overwhelms the continent. Nigeria is unique in Africa in the sense, that it has the requisite human and natural capitals to be making waves in economic development and scientific advancement in Africa. But intellectual lethargy especially the paucity of confidence embedded with self-doubt have dimmed its emerging light.

Nigeria’s nascent democracy is gradually losing its luster and vibrancy due to the tilting to plutocracy and institutional disfiguration, impelled by uncompromising politicians. For Nigeria to continue to be a front line nation in Africa, it must put her house in order. A strength tempered with humility with a responsibility to her continent must be Nigeria’s targeted self actualization. President Obama must shun all the diplomatic shenanigans and niceties and be forthright with Africa’s leadership and compel them to amend their ways and maximize their continent’s God giving potentials.

Peace and conflict resolutions

Nigeria must have quantifiable peace to enjoy steady economic progress. The most pressing is the issue of Niger Delta. Although Nigeria territorial integrity must be respected, Obama administration can work with Nigerian government providing logistic and confident building measures in negotiations with neglected communities in Niger delta. Also, The Obama administration must work with African Union in finding solutions to the cessation of conflicts and wars in the continent. Wars (especially internal strife) are ubiquitous in the continent. Some African governments and warmongers commit their resources to executing endless wars. The West must frown upon the sell of arms to these parties by checkmating their natives arms industries.

Africom as a security tool                                                                                                                                                                                 Africa is confronted with lack of internal security which becomes a deterrent force in economic advancement. Capital flight and low foreign investment are precipitate and ramification of insecurity.
With President Obama enormous social and political capital, he can do a better public relationship job of explaining and restreaming Africom.: Justify, Redirect or End it.

American government have set-up Africom - a military command for Africa, which is to secure peace and goodwill in Africa. Many African countries are skeptical of America’s real intention, fearing that Africom can become a tool to punish America’s foes in the region in the name of fighting terrorism. The unexpressed fear is that it could be used to control and manipulate internal policies and status quo of African nations.

America have to work succinctly to assiduously allay their fears and show to them the benefits of Africom. This must be done with goodwill and civility while respecting African territorial integrity . Peace and tranquility are good for business for all the parties concerned which can be achieved through dialogue and understanding. To this end, American diplomats in Africa have to embark on thorough enlightenment campaign.

Respect for Human Rights

The building blocks of democracy are liberty, freedom and justice. Nigeria cannot be democratic nation without liberty. Nigerians must live in the system of government that encourages freedom and justice. The respect for fundamental human rights must be instituted and adhered to; an environment that provides self-help, self-improvement and self-innovation must be encouraged. Only freedom can make these things possible and make free enterprise a reality, so that free people can create wealth and advance human dignity.

The Obama administration must encourage and support governance that accommodates checks and balances in Nigeria and indeed Africa. This will in turn provide accountability and respect for the populace. What Africa needs mostly include, elimination of dictators and socialist regimes, establishment of virile/free political platform and economy, rule of law and respect for individual rights. All these things do border on fundamental issues which foreign aid alone cannot redress. Until these issues are properly put right, the story of the optimum utilization of these billions of dollars from foreign aid will always remain a mirage.
 

Anti-corruption campaign and legislation
President Obama as the leader of the free world must support corruption elimination in Nigeria and Africa by helping local and international entities serious on the war against CORRUPTION in Africa. The responsibility of fighting corruption is too complex and gigantic to be left for one party. Both Africa and West must partake in the fight against corruption. The West must enact banking laws that will fish out bankers that accept laundered money and tainted wealth from corrupt African leaders and bureaucrats. Ill-gotten wealth must be returned to Africa without much ado, while the culprits must be exposed and prosecuted.

The West must work together with African governments on the war against corruption and bribery. Corporations and Transnational companies operating in Africa must not induce politicians and bureaucrats by bribes in their quest for contracts.
" African Union estimates that the continent loses as much as $148 billion a year to corruption. This money is rarely invested in Africa but finds its way into the international banking system and often into western banks. The proceeds of corrupt practices in Africa, (which the African experts group recommended in 2002 should be classified as a ‘crime against humanity’ because of its impact on ordinary people), are often laundered and made respectable by some of the most well known banks in the City of London or the discreet personal bankers of Geneva and Zurich."

Fair Trade for all Parties
The Obama administration must encourage fair and equitable trade with Nigeria and Africa. The giving of aid must not be the only means to defeat poverty and alleviate quality of life in Africa. Nigeria must be encouraged to rely less on oil but to diversify her economy.

The promotion of trade can be possible when concessions are made to emerging industries in Nigeria and Africa. The West can improve technological developments by investing in areas of science and technology that can sharpen the technical-know-how in the continent.

Obama’s America and the West must stand for fair trade at the World trade organization by conscientiously removing agricultural subsidies given to their own agricultural sectors that adversely affect the traffic of commodities from Africa.

Obama administration must not spoon feed Africans with depreciating aid and charitable donations but also compel them to comprehend that only trade and comprehensive reforms can be the panacea to poverty in Africa. Strategically, a wealthy and stable Nigeria can be a stabilizing force in Africa, and a wealthy Africa will apply her resources in resolving conflicts throughout the continent.

Mr.Emeka Chiakwelu is the Founding director/Principal policy strategist of Afripol Organization.Africa Political and Economic Strategic Center (Afripol) is foremost a public policy center whose fundamental objective is to broaden the parameters of public policy debates in Africa. To advocate, promote and encourage free enterprise, democracy, human rights, conflict resolutions, transparency and probity in Africa.

 

Published in Archive

Polio has been identified as one of the most damaging diseases which can snatch away a child’s physical, mental and emotional stimulus to lead a normal, healthy and happy life. This is why; countries across the world have been working together closely to develop a strong Public Health Campaign for complete and total polio eradication since 1988. In most parts of the world, particularly the western nations, the devastating complication of polio is rarely seen today. Even when poliovirus infection occurs in these areas it is the least harmful strain of poliovirus. In addition, there is adequate vaccine to protect against such poliovirus infection. In contrast, less developed countries including Nigeria, India, Afghanistan, Pakistan and Egypt, the strain of poliovirus is the wild harmful type.

In countries such as Nigeria, India, Afghanistan, Pakistan and Egypt, thousands of innocent children have been crippled for life due to the transmission of the wild polio virus (Paralytic poliovirus). The strain of poliovirus often may lead to the complications of temporary or permanent muscle weakness, paralysis, disability, and deformities of the hips, ankles and feet. In some cases, the deformities caused by poliovirus infection can be reduced with surgery and physical therapy. Such expensive and intense treatments are not readily available in developing nations where polio is still endemic. As a result, most persons who survive death from polio often live with severe disabilities and low productive lives to even support their families. However, proper and timely immunization campaigns, however, especially in India have helped in reducing and controlling the spread of this life changing disease.

Even though all it takes is to vaccinate each and every child under five with the polio vaccine to achieve global polio eradication, this has not been the case especially in Nigeria due to lack of funds and disjointed running of the immunization campaign. In the recent past, however, Nigeria has shown evidence of a reduction in polio cases thanks to the selfless and commendable work done by the ‘Bill & Melinda Gates Foundation’, a joint venture by Microsoft Founder, Bill Gates and his wife, Melinda Gates.

In a meeting recently, the Nigerian President, Goodluck Jonathan publicly expressed his gratitude for the outstanding work done by Bill Gates and his wife in delivering better healthcare services not just in Nigeria but all over the world. He further admired the contributions made by them both in terms of time and money which has resulted in a drop in the number of polio cases from couple of hundreds in 2009 to just a about three cases this year.

Today, Northern Nigeria has emerged as the only place in the world that has seen so much progress in its goal towards polio reduction and subsequent polio eradication in such a short span of time.

 Author: G. Stanley Okoye, M.D., Ph.D. , Chief Medical Correspondent, Africa Political and Economic Strategic Center (Afripol) and St. Jude Medical Missions ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it ).

 

The Board of Directors and Staff of Afripol Organization (Africa Political and Economic Strategic Center) congratulate the Honorable Minister of Finance, Olusegun Aganga on his election as the new chairman of the Board of the Bretton-Woods Institutes, the World Bank and the International Monetary Fund (IMF). This is a testament of the emerging importance of Nigeria in the global financial market.

Olusegun Aganga was recently appointed by Nigeria’s Acting President Goodluck Jonathan as the minister of finance. And now with the subsequent election of Aganga as the chairman of Board of World Bank and IMF in his first outing after vigorous politicking for the position is something worth celebrating. A great credit must be given to our leader His Excellency Goodluck Jonathan on his rebranding of his country especially during his visit to Washington DC. During his interaction with leaders of businesses and global financial institutions he restored their confidence and trust on Africa‘s giant Nigeria.  His Excellency Goodluck Jonathan made a powerful and enduring impression to the world and reassured the world community during his interview on CNN that Nigeria is strong and Nigeria is in good hands. For this we are grateful to our leader.

Emeka Chiakwelu, Principal Policy Strategist at Afripol recently wrote: “The minister of finance must be ready and keen to make sure that Nigeria will not fall into the trap of large external debt and higher inflation. This is important because Nigeria should not be throw back to the gloomy days of large foreign debt. Nigeria was overwhelm with the increasing interest rates and arrears accumulated by the servicing of the foreign debt.” Now with the new position as the chairman at the both international institutions Olusegun Aganaga can clearly and forcefully monitor the financial wellbeing of our great country Nigeria. Aganga must try his possible best to minimise Nigeria’s foreign borrowing and to elevate prudent investment with the resources leverage from bonds transactions.

The growing Nigeria’s financial prowess has been buttressed with the presence of powerful positions already occupied by two distinguished Nigerians: Dr. Ngozi Okonjo-Iweala the current Managing Director of World Bank and Dr. Oby Ezekwesili, Vice-President of World Bank. The coming together of these respectful Nigerians can become a synergy of competence, commitment and vision to further the wellbeing of our country Nigeria. Together with the diligence and dedication of the Acting President Goodluck Jonathan, the new development can aid to realize his aspiration and vision for our great country Nigeria.

Africa Political and Economic Strategic Center (Afripol) is foremost a public policy center whose fundamental objective is to broaden the parameters of public policy debates in Africa. To advocate, promote and encourage free enterprise, democracy, sustainable green environment, human rights, conflict resolutions, transparency and probity in Africa.

 

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