Blood Money for Sudan: World Bank and IMF to the "Rescue"

Author(s): John Prendergast

Source: Africa Today , 3rd Qtr. - 4th Qtr., 1989, Vol. 36, No. 3/4, Shari'a Law and Strife
in the Sudan: Is Peace Possible? (3rd Qtr. - 4th Qtr., 1989), pp. 43-53
Published by: Indiana University Press

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 Blood Money for Sudan:
World Bank and IMF to the "Rescue"

John Prendergast

On June 30th of this year, a lightning coup in Sudan resulted in a new

Islamic fundamentalist military junta which so far has shown little commitment
to taking the necessary steps to help encourage a meaningful peace process.
Instead, General Omer Bashir and his Revolutionary Command Council have
spent the vast majority of their first months in office traversing the globe in
search of military and economic assistance from whomever will listen.
Unfortunately for the people of Sudan, the Intemational Monetary Fund
(IMF) and the World Bank have heard. In early September, the World Bank
spent two weeks consulting with the Sudanese Govemment. In mid-October,
red carpets were rolled out for the IMF.
These two multilateral institutions have a long history of collaboration
in economic and development planning in Sudan. The results, as outlined
below, should help to shatter any illusions that structural adjustment and
primary export-dependent models of development are the key to solving
Africa's economic and humanitarian crises.
Entranced by extravagant promises of Arab and Western capital in the
early seventies, President Ga'far Nimeiri launched the Breadbasket Plan,
intending a massive increase in investment in food production for export to
the Middle East. After five years of compounding indebtedness, endless
project implementation delays, a skyrocketing trade deficit, and two oil shocks,
the govemment reached the end of its economic rope. Nimeiri signed the first
of a series of stabilization programs in 1978 with the IMF.
The World Bank and the IMF cooperated in developing the Economic
Recovery Program, which combined the following:
a) currency devaluation;
b) liberalization of trade;
c) bank credit restrictions;
d) interest rate increases;
e) curtailment of the growth of the money supply;
f) reduction of the governments budget deficit through social spending
cuts, massive layoffs, and removal of subsidies on food and other
consumption items;
g) establishment of a moratorium on new development projects;

John Prendergast is a Research Associate with the Center of Concem, 3700 13th Street NE, Washington, D.C. 20017, and
co-coordinator of the Coalition for Peace in the Hom of Africa.

3rd & 4th Quarters, 1989 43

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 h) promotion of Sudan's traditional export sector, especially cotton; and
i) increasing privatization of the economy.

Consequences of Coaditionalities

1. Promotion of Primary Product Exports

In the words of its own proponents, 'The World Bank's main goal as a
development institution is to assist a country both to accelerate its economic
growth and reduce domestic poverty by increasing the productivity of the
poor."2 Consequently, the cornerstone of the World Bank/IMF approach to
Africa has been to support productivity increases of primary products for
export, in order that countries like Sudan grow out of their economic malaise.
The World Bank was a major supporter of the mechanized agricultural
schemes that were the centerpiece of the capital intensive Breadbasket Plan.
Then in 1978, when the government signed its first stabilization agreement
with the IMF, the World Bank halted all funding for rainfed mechanized food
production schemes, offering Sudan a massive rehabilitation plan to rebuild
the cotton producing infrastructures.
The economic, social, and political effects of the export-led growth model
in Sudan are becoming increasingly graphic. Both the mechanized grain and
irrigated cotton schemes supported by the Bank in Sudan have given the
advantage to the wealthiest segments of society with capital to invest (traders,
religious leaders, military officials, already large land-owners, and agri-
business), while pushing smallholders off their land.
Food production for local consumption has fallen sharply during the last
decade and the country has developed an import dependence on wheat
through U.S. taxpayer subsidized commodity aid programs. By the time the
1983-84 famine hit, over a million of Sudan's farmers were at risk of starvation.
The government, strapped by a growing debt, was unable to purchase any
of the over 800,000 metric tons of grain produced by private commercial
farmers in the east.3
Specifically, with money from loans and subsidies, indirectly from the
World Bank, businessmen were encouraged to buy leases on large tracts of
land, import tractors and plant crops for export. Safeguards such as lease
conditions about retaining tree belts or creating corridors for nomads' herds
were ignored, while many mechanized farms began to cultivate without
permission. The lease-holders moved in and paid off or evicted the small-
holders, prevented nomadic herds from grazing, cleared off trees and cover,

1. Economist Intelligence Unit, Sudam Coutry Profile, EIU, Great Britain, 1989, Section 0.
2. Edward Jaycox, 'What Can Be Done in Africa?, in Berg, Robert, Strategies for African Developmet (Berkeley: U. of
Califomia Press, 1986), p. 20.

3. Fantu Cheru, The Slent lRevolitio. In Africa: IMF CoaditomUty or D_nocrac (London: Zed Press, 1988), p. 241.

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 John Prendergast

and deep-ploughed the soil. After a few years without fertilizer, crop yieids
fell below profitable levels and the exhausted and eroded land was abandoned,
while the lease-holders moved on to repeat the cycle elsewhere, leaving
behind landless laborers or migrant workers who were employed on the farm
'The results have been poverty for the displaced farmers, ruined aIn? , pT'.it
for the elite, a good political return for the then Nimeiry government and plent
of sorghum for export to the Middle East - but not much food for poor
Sudanese. The schemes are still continuing"4
Displaced pastoralists have fought unsuccessfully, and s-om efmes
violently, to retain access to their grazing lands. After being forcibly removed
most sought new pastures, often in areas already used by other pastoralists
or smallholders, or else shifted to increasingly marginal ecological zones.
Bloody conflicts over land ensued, particularly in Blue Nile, White Nile, Upper
Nile, and Southern Kordofan provinces.5 Pastoralists are often then the direct
agents of the depletion of fallow and scrub and receive much of the official
blame for the encroachment of the desert, estimated at 10 km per year.6 As
conflict rather than cooperation has come to dominate most relations between
settled and nomadic peoples, herds have come to be barred from agricultural
fields, which consequently lose the fertilizing benefits of their manure.7
Ignoring the disadvantages of dependence on one export, the
extraordinary fluctuation of commodity prices in the world market,
imbalance between price levels for commodity exports and manufactured
imports, the World Bank in 1978 plunged support into the cotton-dominated
Agricultural Rehabilitation Program (ARP). This program included the
overhaul of the government owned Gezira Scheme, the world's largest farm
under single ownership and the major producer of Sudan's long and medium
staple cotton.
Although Bank reports point to increased cotton production as proof of
the success of the ARP, they fail to note that the increase in production per
farm has actually declined. Overall export earnings, meanwhile, have fallen
by 15 percent. In addition, the production of Sudanese cotton, a regular victim
of a fluctuating world market, bears an import dependence of 43 percent.
Although the six IMF-imposed devaluations implemented between 1978 and
1985 may have had the effect of making the country's exports more attractive

4. Nick Cater, Sudan: The Boots of Famine (Oxford: Oxfam, 1986), p. 22.

5. K. el Medani, The Impact of Economic Deveiopment on the Ethnic Groups lshabiting al Reuk Region, thesis, University
of Khartoum, 1978.

6. Jan O'Brien, 'Sowing the Seeds of Famine: the Political Economy of Food Deficits in the Sudan," Reiew of African Poltial
Economy 33, 1986, p. 197.

7. Richard Franke and Barbara Chasin, Seeds of Famine (Totowa, NJ: Allan Held Publishers, 1980), p. 46.

3rd & 4th Quarters, 1989 45

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 to Westem customers, they also triggered a dramatic increase in the cost of
domestic production.8
Poor ecological management of the Bank-supported ARP has similarly
increased cost while also causing severe environmental damage. Of the $85
million allocated for the third ARP in 1987, $50 million was earmarked for
pesticides for the 1987-88 cotton crop. Environmentalists fear that the
sustained monocrop cotton production, which has replaced traditional crop
rotation methods, may now be pushing Sudan towards a 'disaster period' in
which the cost of production, due to escalating pest problems, will exceed the
value of the yield. Today, the cost of pesticide inputs amount to a third of the
total cotton crop value.9
Meanwhile, less than one percent of ARP III is allocated to 'Integrated
Pest Management,' although IPM is the preferred pest control method
according to the Banks own guidelines. IPM involves maintaining pests at a
harmless level, using biological and cultural means rather than chemicals. In
the absence of Bank funds or pressure to integrate these techniques into
national production, Sudan continues to employ as many as 20 chemicals
applied six times per year. As a consequence, irrigation canals are being
contaminated, the fish population is declining and there is a growing build-
up of genetic resistance within the pest population. Farmers, excluded from
any responsibility for pest mnanagement, have no say in determining the pest
control measures and thus no incentive to practice IPM, and they may well
be at risk themselves. 10

2. Devaluation
The rationale for currency devaluations as part of structural adjustment
packages are three-fold; to stimulate export production, curtail import
demand, and discourage the black market. Yet despite six major devaluations
since 1978, the balance of payments, inflation and the budget were not
affected as projected. The current account deficit went from six percent of GDP
in 1977 to eleven percent in 1983.11
One of the reasons devaluation failed to improve the performance of
exports was that the price of cotton declined in the world market. This is no
fluke. "Many of these [developing] countries produce more or less the same
commodities for export. With the sort of competitive devaluation the Fund
seems to encourage among them, we have witnessed continuous increases

8. Gayle Smith, Case Studr:. Sida (Washington, D.C.: Development Group for Alternative Policies, 1989), p. 8.
9. Ibid.

10. Ibid.

11. World Bank, Sudaa: Mecag hie.s and Stuctural Ialmce, 1983, p. 218.

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 John Prendergast

in output and export volumes, but reduced foreign exchange earnings. The
net beneficiaries are the developed countries importing these commodities"12
Another reason for the decline in export performance was the fear on
the part of producers that they would not get govemment support for essential
inputs. Irrigation, which is highly import dependent, suffered from import
restrictions and foreign exchange shortages resulting from devaluations. Credit
was less available because of credit ceilings. "Thus a devaluation without the
backing of considerable foreign exchange for inputs resulted directly in
shortages throughout the production structure and led to a contraction of the
economy"13.

3. Balancing Budgets
Attempts to reduce government expenditure have caused increased
suffering and instability. Development and social service spending were cut
in half during the adjustment period of 1978 to 1985, leading to a decline
in nutritional standards and access to health care, clean water, and affordable
food supplies. On the other hand, expenditures for general administration
and defense more than tripled during this same period. 14
The IMF Stabilization Program maintained through 1985 exacted a high
price and met with sweeping resistance. IMF-imposed austerity measures
which abohished subsidies on basic commodities provoked major riots in 1982,
and in 1985 demonstrators against bread and sugar price hikes chanted "We
will not be ruled by the World Bank! We will not be ruled by the IMF!" Those
demonstrations marked the beginning of a ten day popular uprising that
unseated the Nimeiri government and, for a time, ended IMF involvement
in the country.

4. Pnivatization and Foreign Investment

Because of IMF conditionalities calling for increased foreign investment
and the lack of domestic facilities, Sudan turned to foreign capital to enhance
export capabilities. The disadvantages to Sudan have been the following:
a) the processes of adjustment of the local production systems to
international demand conditions have been enforced;
b) the domestic demand structure has been adopted to the pro-
duction profile of foreign firms;

12. E.IM. Mtei, 'Comments,' in Africa amd the IMF, Gerald Hellinger, ed., (Washington, D.C.: IMF, 1985), p. 98.

13. D. Hansohm, 'The 'Success' of IMF/World Bank Policies in Sudan,' in World Rose#lom amd the African Food Crb1a,
(Birmingham: James Currey Ltd., 1986), p. 153.

14. Cheru, op. cit., p. 238.

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 c) income has been redistributed favoring the rich; and
d) foreign companies have been exempt from taxes, import duties,
and restrictions, which shift capital and market risks to
government. 15
In the private sector there are roughly two groups: smallholders and
intemational or domestic large-scale investors. Proposed policy measures have
been targeted for the latter's benefit. 16
'The great hope set in private investment both overestimates the
capability and willingness of private capital owners to invest in productive
enterprises and underestimates the adverse effects of private investments. T
development of mechanized farming - supported by the International Bank
for Reconstruction and Development - is an impressive example of 'negativ
development. The govemment subsidizes a type of production which is hard
economically feasible, is directed to short term profits accepting high ecologic
costs and leads to increased inequalities and displaces the original
producers."17

5. Deflationary fiscal and monetary policy

The stimulative effects of devaluation have consistently been nullified b
deflationary policies. The IMF has been criticized often in Africa regarding t
issue of depressing growth. In Sudan, this restrictive monetarism has not
helped in the battle against inflation.18

6. Pricing policy
To stimulate production, higher farm-gate prices have been offered to
producers. By giving higher prices ostensibly to producers, in Sudanese reality
the big traders are being enriched, not the farmers. The trader's position is
enforced by the lack of alternative credit sources. No coordinated serious
attempts have been made to control this wasteful and destructive speculation.

7. Economic Indicators
None of the IMFs stabilization objectives were met during the seven year
period from 1977-8 to 1983-4. The results:
'(A) in terms of balance of payments:
- the current account deficit increated from 6% of GDP in
1977-8 to 11% in 1983-4
- officially estimated total foreign debt increased from US $2
bn to US $8 bn (1984)

15. Hansohm, op. cit., p. 153.

16. Ibid., p. 152.

17. Ibid., p. 153.

18. Mannshya Hu Case Study: Sudan: in IMF ComdItIomilty aad Stabiliuatloa Policies: Sudan, Brazil, md Megco
(Ann Arbor, MI: University Microfilms Intl, 1988), p. 86.

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 John Prendergast

- the debt service ratio rose from 19% (1978) to over 150%
(1984)
- the Sudanese pound depreciated to 27% of its pre-1978
value
- the multiple exchange rate system remained intact, with
gaps between the various rates having been widened
"(B) in terms of the domestic economy:
- GDP declined in real terms, and GDP per capita fell from
US $483 to US $344
- Gross national savings became negative, falling from about
2% of GNP to 0.3% in 1982-3
- the growth of the money supply increased to almost 60%
in 1983-4 in comparison to less than 30% before 1978
- the government's budgetary recurrent deficit rose from 5 to
9% of GDP
- the annual rate of inflation rose from 20% to over 40% in
1982-3.719
The economic analysis that leads to IMF and World Bank presciptions
is based on an ideological model of the Sudanese economy that is
fundamentally flawed. Its basic assumptions are:
A) the free play of market forces will produce an acceptable pattern
of investment, production, and trade;
B) internal and external imbalances (inflation and balance of
payments deficits) are caused by excessive intemal demand; and
C ) 'market forces will be able to produce a sustained growth in
production and employment, if not disturbed by government
intervention or inflation'"20
The IMF/World Bank analysis of the 'mismanagement of the Sudanese
economy fundamentally misreads what the 'state' really is in Sudan. State
policies do not represent the general interest of the Sudan but the interests
of a few social groups; the military, the national capitalists, and the state
employees. The states shrinking economic and social basis restricts its options
greatly. The overall policy aim of 'developmenf has been replaced by the fight
for survival of the government.21

19. R. Brown, 'The Rationale and Effects of the IMF Stabilization Programme in Sudan," in Pblitical Dimeseloms of the
iateartioal Dekt Crisi B. Campbell, ed., International Political Economy Series (London: Macmillan, 1988), p. 28.

20. Richard Tetzlaff, The World Bak: Powr lstrunteat of the USA or Aid for Developing Couatries, (Munchen, Koln:
Weltforum Verlag, 1980), p. 249.

21. Hansohm, op. cit., p. 152.

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 'IMF and World Bank intervention has further reinforced the existing bias
toward elite-oriented development strategies"22 These exclusionary policies
are a fundamental reason, in addition to the imposition of Shari'a law, that
the Sudan Peoples Liberation Army (SPLA) has taken up arms in the South.
For the SPLA, it is not only who reaps the benefits of development in
Sudan, but also where those benefits are invested. With its almost exclusive
emphasis on the east-central region of Sudan, where large scale rainfed
agriculture and the major govemment-owned irrigated schemes predominate,
Bank lending has also reinforced the country's uneven pattern of resource
distribution. The demand for decentralization and more equitable regional
resource distribution is at the heart of the SPLAs struggle.

IMF: A Tool of US PoUcy

For seven years the IMF fulfilled three major functions in Sudan. F
it conducted a 'holding operation' until 1985 by negotiating stand-by
agreements with the government during each of a series of balance-of-
payments crises, despite the fact that its own conditions had not been met.
Second, it coordinated the international donor bail-out of the Nimeiri regime.
During negotiations for Sudan's 1984-85 stand-by agreement with the Fund,
for example, the U.S. Agency for International Development (USAID) twice
intervened and paid Sudan's outstanding debt to the IMF, only to be repaid
with IMF funds when the agreement was finally negotiated. Third, successive
IMF-Sudanese government agreements paved the way for the increased
bilateral funding that helped keep the Nimeiri government in power.
The people of Sudan are unlucky to have been born in a region the U.S.
considers strategic. Up until the last year (1985) of large scale IMF involvement,
the U.S. used the IMF to legitimize and facilitate the flow of external resources,
for the following reasons. First, the Reagan Administration was still deeply
immersed in its 'Evil Empire" approach to the Soviets, who were still firmly
committed to their invasion of Afghanistan. Second, the Iran-Iraq war
continued to rage, jeopardizing oil supplies to the West. Third, U.S. policy-
makers felt that Sudan's neighbors, Ethiopia, Libya, and South Yemen,
represented a menacing threat to U.S. interests in the Red Sea and Gulf of
Aden. Fourth, Presidents Nimeiri in Sudan and Siad Barre in Somalia were
seen as reliable U.S. allies who could help ensure the free flow of oil, the
containment of regional anti-Western adventurism, and access to air fields and
harbors for U.S. military forces. Fifth, Nimeiri was the only African head of
State other than President Anwar Sadat, who was a party to the agreement,
to support the Camp David accords. And last, Sudan controls the flow of the
Nile River northward to water-starved U.S ally Egypt.

22. Cheru, op. cit., p. 264.

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 John Prendergast

In February 1986, less than a year after Nimeiri was overthrown, the IMF
declared Sudan ineligble for further borrowing due to the government's
inability to settle its arrears to the Fund. Despite this, the IMF has maintained
'its role as mediator in the management of Sudan's balance of payments crisis,
and between the donor community and the Sudanese Government.23 In
July, 1987, a 'Program of Action' was jointly prepared by the Government
and the IMF, detailing the same mix of policies as the usual stand-by
arrangements.
Even without U.S. pressure, it is impossible for the IMF to simply walk
away from the nearly $1 billion arrears the Sudanese Government owes.
Consequently the Fund is again at the negotiating table with the current
government of General Bashir. Exchange rates, price decontrol, and
privatization are on the agenda, with a view to a resumption of payments on
arrearages and the development of a structural adjustment program.

Structural Transformation

Citibank Vice President George J. Clark typified the international fina

cial community's analysis of debt problems in Africa when he said recentl
"Africa doesnt have a debt-service problem. Africa has an export problem.
Clark went on to claim "[World Bank and IMF] wisdom is so overwhelmin
that there just isn't anybody else in their league. The suggestion that somebod
else is going to come along with some new wisdom is going to be
disappointed.
Despite that pre-emptive strike, the evidence continues to pour in that
structural adjustment, as presently constituted, is considered a success only
by the spokespersons and apologists of the IMF and World Bank. So the
search for alternatives must be of paramount importance.
Two questions can be asked representing two different approaches in the
formulation of alternative conditionalities for the Sudan. The question 'What
strategies are available to a country if it wishes to disengage itself from
dependence on the multilateral institutions?" may not be viable given the class
domination as it exists in the Sudan.
A more appropriate question is "What strategies can be pursued which
can strengthen the position of the producers, and to what extent can they
further political and economic emancipation of the population?"25

23. Brown, op. cit. 33.

24. Afrca New, June 12, 1989. p. 2.

25. Tetzlaff, op. cit., p. 249.

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 Although certain European and American academics have offered
alternative conditionalities for lending to the Sudan26, an important voice in
the movement toward new approaches has been heard. The United Nations
Economic Commission on Africa (ECA), representing African Finance and
Planning Ministers, adopted in April the "African Alternative Framework to
Structural Adjustment Programs.'
"That Africa must adjust is for us an imperative necessity," according to
ECA Executive Secretary Adebayo Adedeji. But Adedeji and others believe
African economies must go beyond adjustment to "structural transformation"27
This plan for transformation includes the following policy suggestions.
"A. Strengthening and Diversifying Production Capacity
1. Land reform and enhancement of the role of women as
agents of change
2. Devoting at least 20-25 percent of total public investment
to agriculture
3. Sectoral allocation of credit favoring the food subsector
and the manufacture of essential goods
4. Creation and strengthening of rural financial institutions
"B. Improving Incomes and Income Distribution
1. Reduction of government expenditure on defense as
much as possible
2. Guaranteed minimum price for food crops managed
through strategic food reserves
"C. Expenditures for the Satisfaction of Needs
1. Expenditure-switching to raise government outlays on
the social sectors to 30 percent of annual total
2. Selective policies through subsidies, pricing policies, etc.,
to increase the supply of essential commodities required
for maintaining a socially stable atmosphere for
development
3. Strengthening intra-African monetary and financial
cooperation
4. Limitation of debt-service ratios to levels consistent with
sustaining and accelerating growth and development
5. Specific export incentives for processed exports and
carefully selected primary commodities

26. P. Oesterdiekhoff, see The Developnent Peapectves of the Sudan, (Munchen, Koln: Wetforum Verlag, 1983) G. Hunter,
Ealsting the Snail Farmer the Rasge of Requirenta, (London: John Bennet, Overseas Development Institute, 1982),
The Hunger Machine, (Cambridge: Polity Press, 1980).

27. Africa Newa, May 1, 1989, p. 2.

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 John Prendergast

"D. Institutional Support for Adjustment with Transformation

1. Creation of adequately funded 'supervised food
production credit systems' in rural areas with easy access
by farmers in terms of limited collateral, etc.
2. Strengthening agricultural research focused on production
for local consumption
3. Creation of rural institutions to support cottage industries
4. Legislation -of a clear framework of ownership and
participation of the different socio-economic groups such
as rural cooperatives, artisans, traders, etc.
5. Establishment of community development institutions
6. Greater mass participation in decision-making and
implementation of programs.28
This plan of action is extraordinary because it comes not from the radical
fringe, but rather from mainstream African Finance Ministers, representing
governments which often simply represent the elite and service the needs of
international capital. Yet the realization has been reached at this level of the
importance of popular participation, food security, land reform, and
decentralization of resources.
While the debate over structural adjustment conditionalities continues
to rage, an interim step is needed by donor governments regarding the specific
case of Sudan. Because the present Sudanese economic system is so
dependent on external infusions, because the system is so discriminatory
against small farmers and pastoralists outside the favored central region, and
because long-term conflict makes development and economic growth
impossible, it is time for the U.S. and its allies to press the multilateral institutions
to freeze all transfers to the government of Sudan until a peace agreement
has been reached with the SPLA, and processes of decentralized decision-
making and local control over resources have been implemented.
Because of its historic responsibility in the creation of the quagmire in
the Sudan, the U.S. must take the lead in forging a new deal for the people
of Sudan who have borne the brunt of war, famine, political exclusion, and
economic deterioration. As Paulino Lukudu Loro, Archbishop of Juba, said
recently, "Aid must be very well targeted, or it will kill people."29

28. United Nations Economic Commission on Africa, Afrca. AltermtIve Fraa.wok for Stuctal Adjuatm t Program.
(New York: UNECA, 1989), Table 5.2, p. 38.

29. Interview, August 30, 1989.

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