The Horn Of Africa States: The IMF And The Region – OpEd


The IMF and the World Bank Group have been meeting in Marrakech, Morocco over the past week. What does this entail for Africa and how would this impact the Horn of Africa States, in particular? We will address these questions and others in this article. But before going deeper into the region, it might as well be opportune to mention what these institutions represent and who they are.

The International Monetary Fund (“IMF”) and the World Bank Group (“WBG”) are multilateral organizations created in July 1944 through an international conference held at Bretton Woods, New Hampshire, the United States of America. Memberships of the two organizations, however, became effective only on December 27, 1945. They were created to promote world economic cooperation. The IMF works towards creating world financial and macroeconomic stability through the provision of short and long-term loans to countries that are experiencing balance of payments difficulties, and more particularly when they are unable to meet their international payment obligations. The WBG world assists in long-term economic development and poverty reduction projects through the provision of financial support in the construction of schools and educational facilities, bridges, roads, healthcare facilities, water, and energy projects, and indeed protection of the environment.

They are all lofty goals, and the two institutions collaborate and work together through their annual meetings and conferences, consultations, and even staff collaborations to the extent that it is difficult to segregate between the two. They have the same agenda and attend to them through differing angles. Of the 196 countries of the world, only six are not members of the two institutions. They are Cuba, the Vatican City, Monaco, Liechtenstein, Taiwan, and North Korea. 

As noted earlier, our concern in this article is the relationship the two multilateral institutions have with Africa and their impact on countries of the Horn of Africa States. In this respect, one must first note that all the independent African countries are members of both organizations, but only Egypt, Ethiopia, and South Africa were the only African founding members in 1945. All other African countries joined as members only after their independence from colonial Europe.

The two institutions classify member countries in terms of advanced economies, emerging economies, and developing economies.  21 African countries especially in North Africa are in the emerging economies while the remaining 33 countries are included in the developing economies, which basically translates into low-income or lower-middle-income countries. What is certain is that Africa is in the spotlight and will be so in the foreseeable future. The mother continent is home to the wealth of the world and a large human population, mostly youthful. The same dynamics exist in the Horn of Africa States and the world’s eyes would be on the region, more particularly when the geostrategic location of the region is taken into consideration in the light of the ongoing civil unrest and wars in Europe, West Asia, and Africa.

Africa was a marginal region in the beginning but is coming to the forefront in importance. However, at present, the role of Africa and Africans, in general, in world affairs remains low-key and the region’s role, in the light of its component parts, the numerous small-size states, still has and will continue to have little impact on the IMF and its sister institution, the WBG. The continent has a low percentage of voting power and very few seats on the executive boards of the IMF and the World Bank. The Horn of Africa States does not even exist as a regional block yet and hence has no impact on the two institutions. Indeed, the countries of the region are on the receiving end of aid and grants by the two institutions, except perhaps for Eritrea, which excludes itself from many multilateral institutions.

The Horn of Africa States as in the rest of Africa do participate in discussions of the Executive Board, the various development committees, and the joint annual meetings of the IMF and the WBG. They do, thus participate in the setting of the conditionalities associated with the financial support programs of the Fund and surveillance henceforth. It is these discussions and participations, which bind the countries of the region and Africa more. They are made to go along with conditions that no African country can truly fulfill, where they are claimed to have participated but did not participate, in actual reality. The IMF and the WBG, like any other financial institution, cannot subserve their rules to the needs of the poorer African countries, which at present do need a different set of rules, very different and kinder than those for stronger economies.

Many of the countries of the region do have an extraordinarily difficult balance of payments and requirements thereof, which are tied to many formulae and conditions, which make the situation of the countries worse than when they started discussions with the IMF and the WBG. It is where one should perhaps ask if the countries do need these institutions, as opposed to seeking bilateral financial relations with countries that enjoy stronger economies, making repayments for the finances received from these countries through the mineral base of the countries. 

It is where the need for the countries of the region to cooperate and collaborate with each other arises, with respect to, economic integration, financial cooperation, and discussions with stronger economies.  The Horn of African states must realize that the IMF, the WBG, the European Bank for Development, and even the African Development Bank are the same institutions and accordingly present the same conditionalities to their finances. No wonder no African country ever moves forward in the development path until they set up relations with other economically stronger parties that are not related to these organizations.

The Horn of Africa States, like the rest of Africa, have oil and gas, hydropower, and minerals that are required and needed by the world of today and accordingly should not be sitting at tables where they are the begging parties. The Horn of Africa States region has a special geostrategic location, which major powers of the world and larger economies are competing over, and therefore do not necessarily need the IMF and the WBG. It is, indeed, the IMF and the WBG that would need the region to work with them in due course. It is a sad story when one reads all the time that this heavily indebted country or that country requires IMF support or WBG support. Such support should have been provided long ago, if these institutions were, indeed, genuine with their help.

Or perhaps the two sister institutions can turn the page and come up with quicker, more substantial, and more genuine help than has hitherto been the case, in which case the countries of the region and for that matter Africa could also turn the page. In other words, contracts, and relations with the two institutions should be mutual and not lopsided. A camel loaded on one side always throws away its carriage and/or the cargo on its back down the road, in the long journey of development.

Dr. Suleiman Walhad

Dr. Suleiman Walhad writes on the Horn of Africa economies and politics. He can be reached at [email protected].

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