- I. Patel
- Published Date:
- December 1992
The discussions at this symposium have been rich. Let me try to summarize my reactions to them under five broad headings: (1) the changing meaning of "adjustment," (2) humility about what we know concerning optimal program design, (3) the need for home-grown programs, technical capacity, and technical assistance, (4) the need for external finance, and (5) debt relief. All except the need for external finance have received substantially more emphasis, and agreement, in this symposium than they did in the last one five years ago in Nairobi.
The Changing Meaning of “Adjustment”
There has been evolution in what analysts typically mean by the word “adjustment.” The “mind set” that accompanies terminology does matter. It is unhelpful to suggest, as some have done here, that it does not. Among the real issues lurking behind the terminology are the following.
- (1) What is the relevant time horizon? Is the long run really just a series of short runs? The Governor from Ghana (Ghana, after all, is a relative success story, however fragile it may still be) said no; he said clearly that Ghanaian programs would have been different had they been able to use the longer time horizon that he clearly preferred. Upon reflection, that seems an obvious proposition. Any elementary business course teaches that much about the selection of an appropriate time horizon in planning for organizations. Why should it be any different for national economies?
- (2) What is the analytical basis for the term? Stephen O’Brien was admirably precise about three alternative possible analytical interpretations: (1) increased capacity utilization, (2) a shift along the production frontier toward more tradables, (3) capacity expansion, particularly in tradables. The Group of Twenty-Four’s conception of adjustment was, from the beginning, a matter purely of tradables supply and capacity utilization. It was the World Bank that added everything else that might be related to capacity expansion—thereby converting it into an apparent synonym for development itself. Early in this symposium, our moderator, Mr. Patel, expressed the view that adjustment should now be seen as equivalent to “development.” That, of course, raises the old, and still controversial, question of the meaning of development.
- (3) Might the term refer to governmental capacity? Mr. Boorman argued that all countries are “adjusting” all the time and the word adjustment should be understood as relating simply to the quality of economic management, particularly macroeconomic management. Non-adjusters are bad managers.
The word adjustment has become, in my view, a weasel word. Its meaning is no longer clear, if indeed it ever was. If we are to use it, let us at least try to agree as to what we mean: good economic management, or development, or balance of payments adjustment, or something else.
Humility About What We Know Concerning Optimal Program Design
Everyone is now groping toward better program design. The IMF’s Managing Director set the right tone at the beginning of the symposium: questions remain, he said, and there is room for improvement. In the search for better design, it should be obvious that there will be high returns from a greater volume and variety of inputs. No one has a monopoly of good ideas. The main requirement, in the view of many here, is that there be more non-Washington perspectives in the competition of ideas. The international financial institutions should be more open to outsiders and be willing to listen to all. At the end of the symposium five years ago, the then-director of the Africa Division of the IMF promised the governors greater openness, pragmatism, and flexibility. The governors will be in a better position than I to judge whether this promise has been kept.
Greater humility and uncertainty about the appropriate pace, sequence, and timing of policy reforms (among other matters) have implications for conditioning of loans and performance targeting. It would seem to me that there is room for more intrusive debate about the details of domestic programs but, at the same time, that there should be less external insistence upon the fine-tuning details about which there remains legitimate argument.
The Need for Home-Grown Programs, Technical Capacity, and Associated Technical Assistance
There is now agreement that local “ownership” of programs is absolutely fundamental to their success. The Managing Director called attention to the need for home-grown programs in Africa. Home-grown programs require the building of greater independent African technical capacity. The building of such capacity requires a long time horizon and steady effort (such as that of the African Economic Research consortium). There are no quick fixes in this realm. Although the Managing Director appeared enthusiastic about the prospect of expanded technical assistance, some governors expressed concern about recent cuts in such programs. I trust that the governors will be able to hold the IMF to the implicit promises offered at this symposium.
It is worth reminding ourselves, however, that technical assistance costs and productivity need to be monitored carefully. Technical assistance programs have attracted more criticism than virtually any other sphere of official development assistance, and sub-Saharan Africa gets a relatively high proportion of this form of assistance. It is also important that such assistance efforts not interfere unduly with “learning by doing.” Political leaders are under pressure to think for the short run, and thus to seek the best available advice, and hope the long-run problem of capacity-building eventually just works itself out. Where one sees increasing numbers of expatriates in senior positions, or even merely failure of their numbers to fall, as one sometimes does in Africa, one must wonder about the efficacy of local capacity-building.
In order to provide encouragement, it will be important that the IMF and World Bank not continually insist upon trying to “improve” every detail in home-grown programs. Local policymakers must be allowed to learn. To take a recent specific example, when high quality exchange rate analysis is offered by African policymakers (even when agreement on its detail is not complete) it should not be taken by the Fund staff as a challenge to “parental” authority but, rather, as a welcome sign of growing independent analytical capacity, deserving the benefit of any doubt.
The Need for External Finance
External resources are of course not the only constraint upon adjustment or development; and that is why correlations such as those to which Professor Killick called attention frequently do not turn out well. Where good programs are in place, however, adequate funding unquestionably greatly affects both investment levels and the productivity of investment. Donor constraints on the uses of funds and limited coordination among them can also be extremely costly. There has been a call at this symposium for “perseverance” on the part of African governments undertaking adjustment programs. There must also be donor perseverance: steady and predictable support, in appropriate form, of deserving programs.
The fragility of most sub-Saharan African countries’ economic prospects, on which all agree, implies that the risks of failures on this front are very great. Nor has this symposium devoted much attention to the impact of adverse developments in external trade barriers or world commodity prices upon the prospects of success. There is a strong case for building in waivers or contingency clauses to allow for unforeseen external circumstances.
It seems that external resources will be scarce. How should they be rationed? Should more go to the demonstrably deserving once they have clearly shown their determination? Should more ESAF (enhanced structural adjustment facility) money have been directed in the past year to a relatively few African countries with strong programs rather than remaining unutilized? If so, tighter country selection seems called for. But we had better be sure about the selection process—removing all hints of bias based upon politics, ideology, or great powers’ strategic interest. Can we be confident about the selection process? Are not many governors already saying the process of selection is inappropriate, or too tight, or both? Particularly in the light of the discussion in this symposium and elsewhere of the prospect of “political conditionality,” there is an obvious danger of increased and inappropriate politicization of the selection process.
I have deliberately put the question of debt relief last so that no one could suggest that it was receiving disproportionate attention. During the symposium, Mr. Samuel-Lajeunesse of the Paris Club said debt relief was not “a miracle cure.” Mr. Boorman of the IMF also emphasized that it was not “the solution.” But I heard no one suggest that it was either; these were attacks upon a straw man. Purely pragmatically, given where the majority of Africa’s countries are now, debt relief—especially by the Paris Club—would be enormously helpful. It has so far been much too little and much too late. A great deal of economic damage and human suffering could have been avoided had the need for debt relief been recognized earlier. While the Paris Club members have been fiddling, Africa has been burning. On both economic and humanitarian grounds, the case for rapid and effective action on debt has been far stronger in Africa than in Egypt or Poland, where strategic considerations have generated a relatively lightning-like response. There seems to have emerged a genuine consensus at this meeting that debt relief for Africa, while certainly not sufficient for the attainment of agreed objectives, is now necessary. There have also been constructive suggestions for improving Paris Club procedures. I believe that a major outcome of this meeting has been the general plea from all its participants that the world at last get on with serious African debt relief.