World Bank financial flows

Among the AL-assisted countries in which compliance with policy conditions was high, growth was slower, investment rates fell further and real import growth decreased relative to а control group. Mosley et al. 1991 showed that World Bank financial flows are negatively correlated with growth, but compliance with World Bank conditions are positively correlated with growth. Overall, the World Bank's program effects are negative since the adverse financial flow effect predates the less certain positive compliance effect.

In addition, International Monetary Fund standby credit is negatively correlated with sub-Saharan growth. Empirical studies fail to show the success of Bank/Fund adjustment. Instead, these studies generally show that growth, external balance, and social indicators of sub-Saharan countries with strong Bank/Fund adjustment were no better than those with weak or no adjustment. African leaders see no evidence that the Bank/Fund performs better than national planners, and national planning at least provides indigenes with learning benefits. (Stephan 1999 58-74) Analysis

The 1988 "Toronto terms" of the Group of Seven (G7) agreed to restructure the debt of the poorest (mostly African) countries. However, if creditors apply the same options during 1989-2000 as they did during 1989-90, the total debt of low-income Africa will be reduced by just $2 billion, and annual savings of debt service will only be 2. 5 %. In 1990, Britain's Chancellor of the Exchequer John Major proposed replacing "Toronto terms" with softer "Trinidad terms" that would cancel two-thirds of outstanding debt and reschedule the entire debt stock in one stroke, thus reducing low-income Africa's debt to а OECD by $18 billion.

In 1991, Prime Minister Major announced unilateral cancellation of $18 billion debt--primarily African--after the United States and Japan objected to а terms in the G7. The World Bank, creditor governments, and commercial banks rely on an International Monetary Fund "seal of approval," usually contingent on borrower austerity, before arranging loans or debt write-offs for the sub-Sahara. Africa would benefit from the break-up of this loan and policy cartel through strengthening independent financial centres, the UN, and other international agencies.

Moreover, Africa would gain from putting together its own adjustment programs and from DCs loans based on the financial capability of the borrowers rather than on а seal of approval for national economic policy. These changes, together with DC debt write-downs, DC trade liberalization, and increased foreign aid, can facilitate Africa' economic turnaround. The DCs have an interest in assisting Africa while supporting indigenous economic planning.

Although the immediate cost to а DCs and banks is negligible, this breathing space might enable some African political leaders to form wider coalitions that emphasize long-range planning. While political conflict or blatant corruption may preclude effective capital use in some African countries, а major international effort can stabilize political institutions and improve mass economic welfare in Nigeria, Ghana, Cote d'Ivoire, Senegal, Benin, Zimbabwe, Zambia, and Tanzania.

The results are negative implying that no relationships exist between the acceptance of conditional International Monetary Fund loans and shifts toward autocracy or power concentration. In only one of the eight regression equations is the polity type variable significant: CONCEN has а positive impact on IMF76 in the cross sectional equation. The probit results are even more consistent: in none of these is а polity structure variable significant.

In comparison with the results in Table 1, the control variable (BOPD) did not perform well: it is significant in only four of the eight regression equations, though the sign is in the expected negative direction. Further, it is not significant in any of the probit equations. The adjusted R2 scores are comparable with those in Table 1, and the % of cases predicted correctly is slightly higher than expected by random chance in the probit equations, although that is not very encouraging since none of the independent variables are significant.

Biermann and Wagao's exploration of Tanzania's resistance to accepting International Monetary Fund terms is more directly relevant to а present study, as they are interested in political factors as determinants of the acceptance as well as the success of this high conditionality package. They attribute the resistance and the eventual collapse of that resistance to factors similar to those emphasized in Callaghy's analysis of the similar regime in Zambia, but they do not carry the analysis far enough to determine the success of the Tanzanian reforms. (Stephan 1995 505-34)

The literature which focuses on the consequences of conditionality for political instability conceptualizes the latter primarily in terms of violence. Whether stability or instability follows from the acceptance of high conditionality agreements is seen to depend primarily on the economic effects of such agreements on both overall development and distribution. There are especially sharp disagreements about the effects of conditionality on distribution; many authors believe that distribution is made more unequal, while others believe that the relationship between conditionality and distribution is unclear.

Although the data indicate that countries which solicit the fund for resources typically experience higher levels of political instability than do other countries, this difference appears to be accounted for by factors which characterize the economies of such nations, rather than by the nature of Fund-supported programs. (Abdoulaye 1999 135-37) This conclusion is given particular support by the finding that nations which experience а Fund-supported stabilization program tend to exhibit no significant increase in instability relative to previous or subsequent years.

It is also supported by the absence of any significant conditionality-violence relationships in the time series or lagged cross-sectional analyses. In his conclusion, Sidell does wonder whether the recently introduced and more austere EFFs might not have greater effects on political instability. ] To make way for the new plantations, lands traditionally held by 20,000 pastoralists were expropriated, mostly without compensation, forced to leave, the people and their livestock crowded lands near the newly irrigated plantations. One by one, the displaced tribes began to spill onto а lands of their neighbours. (Stephan 1995 505-34)