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Back You are here: Home Global News News U.S.A. Democracy Lab West Africa's Financial Immune Deficiency

Democracy Lab West Africa's Financial Immune Deficiency

The World Bank and International Monetary Fund (IMF) have pledged $530 million to help Guinea, Liberia, and Sierra Leone.

And in October, at a special session with African leaders on Ebola during the IMF/World Bank annual meetings in Washington, DC, IMF Managing Director Christine Lagarde said that in addition the aid, the IMF would depart from its notorious budget austerity, and actually allow the hard-hit west African nations to increase their budget deficits: "We don't normally say this!" she emphasized. To which the Guinean president, Alpha Condé, responded, "I'm extremely pleased to hear the IMF Managing Director [say]... that we can increase our deficit, which is quite a change from the usual narrative."

He was right. Indeed, if you really want to understand why several West African countries have been so ill equipped to tackle the latest outbreak of the Ebola virus, you need to look at the "usual narrative" of IMF fiscal and monetary policy restraint. That's because it is a major reason for the dilapidated public health systems that have proven to be such a vulnerability during the crisis.

Many experts note that the conspicuous unpreparedness of countries like Guinea, Liberia, and Sierra Leone is a direct consequence of years of insufficient public investment in the underlying public health infrastructure. "We know how to prevent diseases like this, if we can get the basic level of the healthcare systems up to speed," said Columbia Business School Professor Amit Khandelwal. Critics point out that this lack of investment can be traced directly back to sparse spending on public goods dictated by IMF loan conditions and policy advice, which invariably entail adherence to its strict definition of "macroeconomic stability."

Since the 1980s, when the doctrines of Thatcher and Reagan reigned supreme, the IMF's monetarist approach has meant prioritizing price stability (low inflation) and fiscal restraint (low budget deficits) over other spending goals in developing countries. These policies had the effect of greatly limiting overall public spending each year. Because of this squeeze, most of the budget went to immediate needs and recurrent expenditures and little was left over for scaling up long-term public investment in infrastructure, including the underlying public health infrastructure. This led to a serious drop-off in public investment as a percentage of GDP seen across many developing countries that in many cases has been sustained until today.

So the harmful effects of IMF policies on health systems are not direct; it's not as if the IMF comes in and directly tells a country to spend less on public health. Instead it's a two-step process: First the IMF policy targets constrain overall national spending levels, and this then limits the spending available for long-term public investment, including for the health infrastructure. Consequently, chronic and sustained underinvestment in public health infrastructure has become the norm in many countries, year after year, over the last few decades.

Read More: Foreign Policy