Emerging Relationships between Poor Countries and External Sources of Finance

Abstract

CRANFORD PARTT'S WORK IN TANZANIA is probably best known through his published writings, especially his great book, The Critical Phase in Tanzania, 1945-1968, and his service as the first vice-chancellor of the University College, Dar es Salaam. But this discussion of Tanzanian events relates more to another of Cran's contributions in that country - one that is less well known and, sadly, less obviously and immediately successful. It concerns relationships between very poor countries and powerful external sources of finance, upon which poor countries, not least Tanzania, are heavily dependent. In the current jargon, it has to do with local 'ownership,' the degree to which the recipients of external financial assistance are (or are not) in the 'driver's seat' in the design and implementation of development programmes within their own countries.There have been some positive recent developments that build on Pratt's little-known, and less evidently successful, activities in Tanzania in the early 1980s. (I have to confess that I, too, was somewhat involved in these early failures; but also, a little, in the later more positive experiences.) Those recent experiences have, for the most part, gone unnoticed; they deserve to be better known.Consider first Cranford Pratt's role in mediating Tanzania's relations with powerful sources of external finance in the early 1980s. Following a series of serious exogenous shocks to the Tanzanian economy that began in 1979, the government began to run into very serious macroeconomic problems and, as so frequently happens in such times, disagreements with the International Monetary Fund (IMF). The president, Julius Nyerere, always more honest and direct than the average politician, took it upon himself to ask, in a public speech, who exactly had elected the IMF as the finance minister for every country in the world! Relations between his government and the IMF thereafter went steadily downhill.Indeed, they became sufficiently difficult that Robert McNamara, then president of the World Bank and an admirer of Nyerere, initiated a 'mediation effort' between the Tanzanians and the IMF. It took the form of the appointment of 'three wise men' (as they became known locally), acceptable both to the Bank and to the government of Tanzania, to draw up, together with the Tanzanians, a Tanzanian stabilization and adjustment programme that might be acceptable to (or, as we would now say, 'owned by') the Tanzanians, a programme that obviously would be an alternative to the one the IMF had planned for them. Cran Pratt was one of the three. (So was I.)The programme was tortuously constructed over the course of nearly a year. It involved a more gradual effort than the IMF's proposed 'Big Bang' approach and, above all, it tried to preserve, during the difficult stabilization and adjustment process, the goal of economic equity, which was so central to Nyerere's conception of socialism. One could even have called it a 'Poverty Reduction Strategy Paper' (PRSP), such as the IMF and Bank now require of all poor countries seeking their assistance. The programme's attention to genuine local ownership and equity in burden-sharing was also decades ahead of its time. But it failed to impress the IMF. Nor did the government of Tanzania fully endorse all of the recommendations of the wise men and their team. The attempt at genuine mediation, therefore, failed. The recognition of the ultimate need for local (Tanzanian) ownership was not yet in vogue in the international development community. Aid flow subsequently crashed - and so did the Tanzanian economy.But here is the good news. Twenty years later, this pioneering effort has to be seen as an important forerunner of today's so-called Tanzanian Assistance Strategy (TAS). This new approach probably leads Africa and the rest of the aid-recipient world in terms of a genuine shift towards a locally owned, rather than a dominantly aid-donor and IMF/Bank-driven, development effort. …