The role of the IMF in Sierra Leone : economic stabilization and class conflict role of the IMF in Sierra Leone

Abstract

THE ROLE OF THE IMF IN SIERRA LEONE: ECONOMIC STABILIZATION AND CLASS CONFLICT. The aim of this study is to examine the role of the IMF in Sierra Leone through an empirical test of the impact of its intervention in Sierra Leone's economic stabilization process. IMF involement in developing countries' stabilization efforts is highly controversial. Critical questions are: Does the orthodox economic adjustment policy of IMF programmes lead to Stabilization? If so, does it do so at the expense of adjustment and renewed growth. This study reviews some aspects of that criticism. It attempts to recast the ongoing debate over the effects of IMF macroeconomic adjustment policies in developing countries. Analysis of the effects of IMF macroeconomic adjustment policies is difficult because it involves some methodological difficulties in assessing the actual effects of an adjustment programme. Such an assessment would require the evaluation of the counterfactual situation, that is, the set of policies pursued in the absence of IMF adjustment programme - within an economywide framework with complicated concurrent and lagged interactions. Because of the possible effects of internal and external disturbances, simple correlation between IMF adjustment policies and changes in macroeconomic variables (e.g. Balance of payments, Inflation, Growth and Income distribution) must be interpreted with extreme care. Ideally, one would want to evaluate the counterfactual analysis, but its difficult and such models are rarely available. Employing time-series data the study examines the impact of the stabilization and adjustment policy package implemented in Sierra Leone during 1986/87 following a long period of macroeconomic deterioration. The basic aim here is to establish the "facts" of whether the macroeconomic variables considered for Sierra Leone varied systematically before and during the narrowly defined adjustment period (1986/87). The Empirical results of the study are that: First, there is evidence of a negative impact in 1986/87 on the Balance of payments. Current accounts, but not the overall account deficits, are reduced. Second, the evidence indicates that the Stabilization programme fail to control inflation in Sierra Leone. Third, there is no evidence that the Fund's stabilization programme retards growth. Finally, the results indicates that the IMF ' s programme contributed to deterioration on income distribution in Sierra Leone. Based on these empirical evidence the study concludes that the Fund's role should be seen as that of promoting further cooperation between the capitalist class in the developing countries and the capitalist class in the developed countries for maintaining and extension of the global capitalist system, and of deepning class conflict between labour and capital in developing countries.