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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