To "Salone Palavar, Leh we Talk" fans.
The proprietor of this web page, Willie B Faulkner is sick and until his recovery all activities connected with this page will cease temporarily. We wish MR. Faulkner a speedy recovery.
ATTENTION: The founder's inaugural address below is not part of my book
SALONE PALAVAR LEH WE TALK
Founder's Inaugural address.
Salone Palavar, Leh We Talk, is a social media forum and it participants will include a combination of concerned Sierra Leoneans and friends worldwide. It intellectuals,young and old,within and outside the borders of Sierra Leone will converge at our social media forum to address Sierra Leone's ongoing economic, political and social problems. It independence will be determined by the neutrality, the sequences of the Great Debates and the civility by which these debates are conducted. Articles, comments, essays,questions or our 12 man panel summations will be non biased. A panel of 12 eminent Sierra Leoneans and friends, on a bi-weekly basis, will introduce a series of burning issues, through it's "Leh we Talk Forum" and invite contributions from Sierra Leoneans worldwide. The"Great Debate," will proceed and our panel of 12 members will provide an analysis of our bi- weekly session at the expiration of the debate." In short," Salone Palavar, Leh We Talk," is a subsidiary of Enterprise of Faulkner and Muna, EF&M, and it is a social media forum,economic, political and social in perspective. It ultimate goal is to help address Sierra Leone's burning problems and it is neither a partisan solicitation nor a political entrapment. By it settings, our obligation in the long run, may help inform and transform us all.
UNDERSTANDING SIERRA LEONE'S DEVELOPMENT
IS SIERRA LEONE UNDERDEVELOPED OR IN TRANSITION?
WILLIE. B. FAULKNER
The F'TOM WAR IS ON.
Teams D1 and E1 "tug Of monetary war" sessions have commenced, and the chief referee is the IMF (M). The first session ends in a tie and both teams come up with stable trade balanced. In anticipation of the second and third sessions, Nation Omega improves it production techniques to create diversification, but Nation Alpha only adds more workers to the mining and agricultural sectors. Nation Alpha instructs It central bank to print more money. It's a win for Omega. Nation Alpha loses and requests the central bank to print more money again for circulation. Omega adjusts it interest rates, secures health insurance for the workers, and increases the workers wages. Omega wins the fourth and fifth sessions and Nation Alpha loses again and It instructs the central bank to print more money. It secures more archaic farming and mining tools, but Omega adds more sophistication to it factory machines to improve the different styles of it's diversified products and it works. It's a smashing defeat for Alpha and the IMF calls a cease fire to save it from further beatings. The IMF calls for the devaluation of Nation Alpha's local currency,the leone. What transpires and the aftermath will be addressed later on. In the mean time, in anticipation of the sixth and seventh sessions, Nation Alpha invites new mining prospectors, add workers to both it mining and agricutural sectors, but other workers call off due to illness.It gains some increase in the primary products, but substantial portion is for subsistence. It requests the central bank to continue printing more money. Omega,on the other hand, builds more factories, and increases it industrial base. Omega's central bank monetary policy manipulations are just outrageous wins wins the sixth and seventh sessions. Nation Alpha gets another good beating. In the midst of the eight session, the IMF M intervenes again to save nation Alpha from repeated poundings by Omega and, after a lengthy conference with the money- war spectators, calls for debts forgiveness. The IMF also pleads for program supports from the World Bank and other foreign financial assistances on behalf of Nation Alpha.
Now that the "tug of monetary war" sessions are over, for the IMF interventions and the programs it offered to assist the losing team, Nation Alpha, our next approach will be to analyze the outcome of these programs. The programs under our review, are devaluation, debt forgiveness and other policy directives connected with the World Bank's structural adjustment policies, (SAPs).
Devaluation as a monetary policy, means a reduction in the value of a country's currency with respect to goods, services and other monetary units with which the currency can be exchanged.In short, in a developed country, should the basic rules of demand and supply persist, and assuming also, all other factors to be the same, a reduction will reflect a drop in the price of consumer's goods. As a result of this drop, and a resulting upsurge in the consumer's demand or purchasing powers, ,there will be an expansion in both productivity and sales. However, these sequences of changes are consistent with a business environment that enjoys the sophistication of a diversified industrial base, in which the additional profit earnings obtained can be further reinvested to expand it's production. Therefore, given this type of econmic environment, devaluation can stimulate a thriving economy and accommodate the avenue for new employment and wage increase.
In 1985, I witnessed a 60percent devaluation of Sierra Leone's currency, the leone, and to my disbelief, it aftermath was one of total confusion, because it became evident, that the benefits from devaluation was attainable only when a country was equipped with the factors that enabled it to take advantage of the changes devaluation brought, and because these factors were lacking, as was the case for Nation Alpha, hypothetically an underdeveloped nation,the aftermath was nothing else than the igniting of a "Pandora's box.
At one of the IMF's meetings I attended,during the course of events leading to the devaluation, a question on devaluation was raised by me, which, according to my colleagues, was so sensitive as to have gotten me into trouble. The question was I quote, "When there is a devaluation, a country's capacity to produce and the benefits to be derived from the fall in prices are determined by it technological advancements. My country is predominantly subsistence, with no diversified industrial base. What or how can we benefit from devaluation?" The illusion was the fear, that my question could have placed the government's highly anticipated IMF's millions of dollars' loan to the country in jeopardy, and probably with the high expectation, could have been the end of my banking career, but my colleagues were wrong.The leone was devalued, and the IMF's loan went through but under strict specified conditions: sixty percent of the IMF was utilized to drastically reduce the country's external foreign debts, and only forty percent was at the country's disposal. In addition, attached to the Sierra Leone's currency devaluation, were the following IMF' structural adjustment policies, SAP's; (a)the removal of subsidies on rice and petroleum, and (b)trade liberalization, and a three million dollars commitment to the IMF. The Paris club creditors did agree to reschedule Sierra Leone's immediate debt obligations, but because the IMF obligations were not met, not only were all it financial support to Sierra Leone withdrawn, Sierra Leone became ineligible to the use of IMF resources. When the country failed to service it 1993 foreign debts, it was threatened with membership suspension also.
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INTERNATIONAL MONETARY FUND AND THE WORLD BANK.
Let us now examine the International Monetary Fund, IMF and it twin partner,the World Bank. The IMF is one of the world's most influencial monetary institutions, favored by some but disliked by many. The Second World war officially ended in 1945, and in anticipation of it's conclusion, the IMF and the World bank were initially,created to support the restructuring process of the European countries economies ravaged by the war. These two organizations,also referred to as the Bretton Woods institutions were the products of a forty four nation delegates conference held in the village of Bretton Woods, New Hampshire, USA. In 1944, and what they sought to accomplish during the post war era was later on, extended to cover the world's poorer nations. Both institutions are owned by the governments of member nations,and specifically, they concentrate on economic issues that will facilitate wider and stronger economies for the member nations.
In some respects, the issues undertaken by both the IMF and World Bank are similar: they both have their head quarters in Washington, DC, hold joint annual meetings, share a common library and other facilities, exchange regular economic data, engage in joint seminars, and send out joint missions to member countries. Despite these similarities, by their multi functions and operations, they are distinct. Each has a distinct purpose and structure, with lending capabilities from different sources,assists different categories of member nations, and each strives to achieve distinct goals through processes peculiar to itself.
Historically, the Bretton Woods conference initiatives were directed toward resolving the aftermath of the 1930s depression, in which the following issues had to be contended with; firstly, the unpredictability of the European countries currency exchange value variations, and secondly, the widespread trends among the European nation governments, toward undervaluing their national currencies for foreign exchange. The role of the IMF, to the European crisis was that of maintaining an orderly system of payments and receipts between the member nations, and to accomplish it goals, the IMF assumed the capacity of a cooperative unit. Member nations willing to (a) abandon some aspects of their national sovereignty and (b), abstain from practices injurious to the economic well- being of fellow members, would have access to a financial pool from which they can borrow money in time of financial needs. These guidelines became enshrined in a "code of conduct" agreement that stipulates; " Members will allow their currencies to be exchanged for foreign currencies freely and without restriction, keep the IMF informed of changes they contemplate in financial and monetary policy that will affect fellow members economies, and to the extent possible, modify these policies on the advice of the IMF, to accommodate the needs of the entire membership." Should member countries consent to the IMF code of conduct, a pool of money would be available and placed at the disposals of consenting nations to borrow, in time of financial needs. It must be noted however, that unlike the IBRD, this IMF initiative does not make it a lending institution. The IBRD has the primary responsibility for financing economic development and it first loan in the 1940s were toward the reconstruction of the war ravaged European economies.Therefore in perspective, the purpose of the World Bank is, to promote the economic and social progress in the developing countries world wide, and to raise their productivities to secure a better way of life for all.
SIZE AND STRUCTURE.
Unlike the World Bank, the IMF has no affiliate organization and substantial number of it member staff are located at the Washington, DC, headquarter. However, it runs small offices in Paris, Geneva and the United Nations in New York. Typical of the World bank is it subsidiaries and complex structures. Within it, are the two main affiliates, the International Bank for Reconstruction and Development, IBRD, and the International Development Association, IDA. The World Bank's affiliation to the following three agencies are minor and void of any legal or financial commitments; the International Finance Corporation IFC, which mobilizes funding for private enterprises in developing countries, the international Center for Settlement of Investment Dispute, ICSID, and the Multilateral Guarantee Agency,MGA. The World Bank group is about three times the size of the IMF, and maintains approximately, forty offices worldwide.
The IMF's member nations, whether they are wealthy or poor, retain a rightful claim to it pool of financial resources, but the members financial obligations are essential to ensure the orderly and stable international monetary system. The IMF is neither a bank nor a broker between investors and recipients funding is primarily from quota subscriptions. It retains a pool of resources to help restore member nations foreign exchange shortage or balance of payment deficits, and each member contributes to it a certain amount of money proportionate to it economic size and strength, or the richer countries paying more and the poorer paying less. It interest is minimal, below market rates, must be repaid within three to five years, and It pool resources are reviewed every five years. The World Bank, as an investing institution, borrows from one side of it financial environment to pay the other side in need of fiinancial help. It equity shares, at approximately, $180 billion, are owned by member nation governments. It borrows money by selling first class rated bonds and notes directly to governments and central banks and uses the proceeds as affordable interest rate loans to the developing countries. It subsidiariy, the IDA is financed largely from member nation donor grants and is one of the largest. Access to the World Bank borrowing financial resources excludes wealthy member nations or private individuals and for the developing countries, members rights to loans are based on their credit worthiness, and the "poorer of the poorest" the member is , the more favorable is it borrowing chances. Usually, developing countries whose per capita gross natural product (GNP) exceeds $1305 may borrow from IBRD. By per capita or less we mean, that qualification for borrowing or the measure of wealth is determined by dividing the value of goods and services produced in a country during one year, by the number of people in that country.
In October 13, 2013, it was reported by both the Brookings up front news magazine and the English version of the Chinese publication, Xinhua, that the IMF and World Bank member nations' ministers of finance and their central bank governors attended the two institutions' annual meetings in the United States, and at these meetings, the African central banks governors voiced their concerns over the increased down- side risk to the global economy. Further more, they mentioned the uncertainty of the upward trends of the world's unconventional monetary policies and the threat of possible devastating budgeting challenges in the United States, which if left unaddressed would derail the fragile economy. According to the Xinhua publication editor, Shen Qing, the governors assured the meeting of their commitment to pursue inclusive growth-oriented policies consistent with macroeconomic stability, and to rebuilding buffers to better cope with the external unpreditabilities. Other topics discussed ranged from the IDA17 replenishment project, which is done every three years, as well as the new world's IDA17 strategy. The issues at it's October 14 and 15 meetings would be addressed and finalized at a further meeting in Moscow. The countries benefiting from the IDA17 strategy project are the Republic of Guinea, the Republic of Congo, but the Guinea project , when completed has the potential to provide energy to neighboring countries like Sierra Leone.
In the twentieth and twenty first centuries, the role of the IMF has been transformed, multi functional in perspective, but some of them, in partnership with the World Bank are controversial. Firstly, it rescues member countries in financial crisis with conditional emergency loans but by it structural adjustment policies,SAPs, it devaluation policy in1985, required that sixty percent of the IMF loan to the Sierra Leone government, must be utilized to drastically reduce Sierra Leone's external debts. In addition, the IMF demanded the implementation of other structural adjustment policy requirements, such as the curtailment of spendings on medical, educational and environmental projects, some of which were unsustainable,and catastrophic. Furthemore, because of the IMF enormous leverage on it members, it roles on many occasions have been called to question and for the underdeveloped countries, it policies, were recipies for instability. On the other hand, the IMF has played a vital role against money laundring, has become co- partnerships in economic research, snd statistical data, and has occasionally worked against terrorism. The IMF also, provides technical assistance and training in areas consistent with it world wide mission.