 IMF, three letters that have come to stand for debt and despair in many countries in Asia, Africa and Latin America. Now the impact of the IMF, which is a shadowy body in Washington DC, is felt in our day-to-day life in the cost of electricity, in the cost of fuel, in the recruitment of teachers, in the construction of hospitals. All of these are affected by the policies and prescriptions of the IMF. But why is the IMF still a thing? Why do our countries keep going back to the IMF for more money and go further into debt? To understand some of these issues we are talking today to Grieve Chalwa, he is the director of research at the Institute of Race, Power and Political Economy at New School. He is one of the members of the collective on African political economy and he is also one of the authors of the latest tri-continental dossier called Life or Debt, which actually details Africa's experience with the IMF and how the IMF has pushed Africa into deeper misery. Grieve, thank you so much for coming to People's Dispatch, for talking to us and giving us an idea of what's happening with the issue of debt, especially in the global south. Now we're talking about the IMF today and there have been a lot of cases of the IMF, you know, playing a role in countries in Africa and Asia, for instance. You've written about Zambia and Ghana, closer to where I am, for instance, we have Sri Lanka and Pakistan, all of them wrestling with this issue of the IMF and the kind of conditions it's imposing. But just for the benefit of our viewers, we kind of, I mean, it's, I think, economists like you have been warning and predicting and, you know, been vindicated for years when you said that the IMF brings with it austerity policies. There's, you know, a reduction of government expenditure, privatization, the removal of subsidies, all of which directly affect the poorest people in the country who are presumably the world bank of many of these governments. So why is it that the governments are forced to go back to the IMF again and again and again? Maybe you could even take Zambia as an example. But how are countries relentlessly caught in this trap of the IMF? Thank you for having me on this program and Sydney is an honor. Yes, I mean, the IMF has been a perennial problem for many countries in the south for a very long time. We have to understand that the idea itself behind the creation of an international monetary agency is a laudable idea, right? As you know, we all live in a world that is interdependent. We all should rely on one another and certainly some countries sometimes go through financial problems and other countries tend to be doing well. So the idea of having an international agency to coordinate monetary crisis is a laudable one. And I think, but sadly the IMF has not been that type of agency, right? In many ways, the IMF has not been the agency that comes in to coordinate and help resolve this kinds of crisis, but has been an agency that has added, I think, to the instability, has been the kind of agency whose solutions do not permanently fix the fundamental reasons for crisis, but actually trap countries in this perpetual cycle of debt. And why is that the case? I think part of the answer and maybe a main answer is geopolitics. The IMF has suddenly been a tool of American foreign policy to be specific, Western foreign policy, but certainly American foreign policy to be specific. There is a reason why the IMF is situated in Washington DC, right? So I think that's the problem. An idea for an IMF, an agency to coordinate crisis is a laudable one, but the problem is that the current agency that we have the International Monetary Fund is very much a tool of American imperialism. And this is why we are caught in a perpetual cycle of debt, right? We get into a debt crisis. The IMF comes in to say they're coming to resolve the crisis, but a couple of years later we're back again, because the IMF does not want to sort out the fundamental reasons why we get ourselves into debt. Precisely because if the IMF does that, then the IMF seizes to be a tool of American foreign policy. So I think that I hope that helps in explaining some of these factors. That's a very interesting answer and sort of elaborate that. Let's take the case of Zambia. Recently, I think at 1.3 billion, that is maybe late last year, 1.3 billion dollar package was approved for Zambia, but this is definitely not Zambia's first IMF loan. There have been cycles of debt as you pointed out in the dossier. And you also pointed out the role of, for instance, Euro bonds and devices like that in perpetuating that debt. So could you maybe take us through the case of Zambia and why it has continued to be in debt, so to speak, in a sense, why is it not able to repay these debts? So why is Zambia in a debt crisis? And you're right. This is the 13th time that Zambia is going to the IMF if my memory serves me right. So there are some fundamental issues here. One of the things that I think is worth viewers knowing about is that to develop, countries need to do huge investments. And one of those investments is capital type of investments, especially infrastructure, roads, schools, hospitals, power stations. These are very important inputs into development. These are preconditions for development. Very few countries, if at all any, that have developed, or are called developed, have developed without them. They need the infrastructure. So the infrastructure is crucial. Again, I'd like to go back to another international agency, which the idea of it is important, but the execution of it has been caught up in geopolitics, the World Bank. So the World Bank was again set up. The idea was we needed the development bank, a bank that funds development projects like infrastructure. But again, the World Bank has not been doing that role for which it was set up, because again, the World Bank is caught up in. The World Bank has become a tool of American foreign policy, European foreign policy, again, headquartered in Washington. These things are not coincidences. Now, because the World Bank has been forming its role of development finance, many countries are then forced, such as ours, to seek this money to do infrastructure from so many sources. And I think one of the sources has been what you are calling Euro bonds. A Euro bond is essentially, in many ways, it can be likened to predatory lending. You sort of pick out a loan to try to build a road, and you hope that the road will generate insufficient returns to pay back the loan. But really what you are doing is you are kind of like an unfortunate worker who has such a low pay, but they have huge outlays, and they are forced to go to the local money lender, the local Shylock, to go and borrow to be able to satisfy those money demands. But they can never pay back, and they are in a perpetual cycle of debt. And that is the situation in which many of our countries in the South find themselves in. The entity that is purported to supposed to provide this development finance, this long-term funding, doesn't do it. So many of our countries then, what do they do? They resort to such a type of Shylock in international financial architecture, and then they get caught up in a cycle of debt. The IMF then soups in with the intention of resolving this debt, but they never really resolve it. They never really resolve the fundamental things, and then the cycle keeps going on and on. So that has been Zambia's story since independence. So this is part of Zambia's story, how Zambia finds itself in this kind of crisis. Now, obviously the debt has built up to such a huge amount. We have a country whose economy is a size about $30 billion. We have external debt of about $15 billion. So say 50% of GDP, 50% of our economy is all in debt. And this debt has gone up by 1000% over the last 10 years. So clearly, clearly we're in a situation where we can't pay. And one of the solutions, again, which I think is a wrong solution, is to go back to the IMF. But this is essentially how we find ourselves in this situation. Great. Just to sort of also expand the discussion of the question of debt. I mean, often when we think of debt, we think of debt between countries. Is country A lending to country B, something like that. But I think one of the aspects you're sort of detailed is how it's no longer the case. For instance, BlackRock, which is a private agency, has a huge role in Zambia right now. And in fact, not just in Zambia and many other countries. So also how has the nature of debt changed? As in how is it no longer so much between countries if I'm not mistaken? Yeah, that's true. Yeah, it's no longer between countries and it's no longer between multilateral agencies. And again, I think the important point to highlight here is that a big chunk of debt, debt per se is not bad. Precisely because we're trying to lay up this infrastructure that is going to power development in the future. But what we do need are the kind of multilateral agencies such as the World Bank that can finance these kinds of outlays in a humane way, in a way that is long-term with minimal interest rates. Something that the new development bank, aka Bricks Bank is trying to do. So originally this was the intent. And for a while, this is how it worked. So multilateral agencies, bilateral entities, country to country, were the major providers of financing of debt. But over time, this changed. The multilateral agencies became ever more geopolitized, which means they became ever more tools of American and Western foreign policy. So they began to weaponize debt and they began to give it out in very small bits and they began to attach huge conditions to it. Similarly for Western bilateral countries, they began to do it in a way that was paternalistic, et cetera, et cetera. So again, funny thing is the IMF then made, the IMF among other sort of financial experts proposed this idea of a Euro bond, the idea that you know what, your countries are now mature, you're grown. So as opposed to getting your funding from bilateral agencies or bilateral countries, why don't you just issue bonds? You issue a bond, which is really an exchange of paper. You issue an IOU, you issue a paper on international markets and a bunch of people across the world will then subscribe to that paper. They will lend you the money. And this is how the likes of BlackRock became important lenders. Now, I don't need to tell you, I think it's common knowledge that borrowing from BlackRock is very dangerous and borrowing from many other hedge funds is also very dangerous because often those entities tend to have nefarious intentions. They will overload you with debt because they're interested in particular assets. Some of them are interested in you defaulting so that they can move on and move on to some of your collateral, some of your assets, et cetera, et cetera. So that's essentially how the profile of debt has changed over the last couple of decades to the extent that many countries in the South, Zambia in particular, a huge chunk of its debt, about external debt, about 50% of its external debt is now all to the likes of BlackRock, which puts us between no pun intended, but in between a rock and a hard place, as it were here. Right, this actually takes us to our next question, which is that one of the aspects you've detailed in the dossier is also the fact that the IMF claims to have kind of changed. In 2016, there was a document which indicated that there was some rethinking on the issue. In 2020, when the pandemic took place, the G20 had what is called its Debt Suspension Initiative. And then there was a new initiative, which again looks to sort of reconfigure some of these debts. But these mechanisms, have they really been effective? First of all, the IMF hasn't changed. I think that is just public relations, it's PR, but the facts really suggest that hope. IMF austerity is alive and well. My own country, Zambia, for example, which you mentioned a short while ago, has a new IMF program or 13th program. And this was approved by the IMF's Executive Board in September of 2022. And the signature policy of that program is austerity. And Zambia is not an outlier, I think there have been systematic studies, one that came one recently from the international labor organization that really shows that IMF austerity is very much alive in this third decade of the 21st century. So that's important and I'm very glad you brought that up. That's important for people to know. And again, it goes back to the question of why does IMF do austerity? Because the IMF is a tool of American foreign policy, Western countries foreign policy. Austerity is a way to make sure that you're forever dependent on debt. That is the way it is really. If you're forever dependent on debt and you're forever dependent on the type of debt that takes you back to the IMF. So people, it's important to do that, to put that across. Yes, and then there are mechanisms which have been set up to resolve the debt crisis, right? So we've got a debt crisis, how do we resolve it? And you talked about a debt service suspension initiative. This happened during COVID. And the idea again was very laudable. Let us suspend debt service on those countries that have a huge burden, given what's going on with COVID, right? Many Western countries did not actually participate in this DSSI. China, interestingly enough, was a one entity that suspended debt service for many countries that were indebted. So DSSI did not work as intended. And then when DSSI debt service suspension initiative expired, a new approach debt resolution came up which is what is called the common framework, the G20 common framework. Again, the G20 common framework has not worked. One of the reasons why the G20 common framework has not worked is that, A, the profile of debt has changed. The G20 common framework proceeds as though most of the debt is country to country or multilateral. But like you said a short while ago, debt in this third decade of the 21st century, the profile is different. We've got the likes of the black rocks and so on and so forth. But these do not participate, which makes the G20 common framework moot, right? And also there's geopolitics, right? So obviously, China has a reason as a new lender, the traditional old school lenders, and I engage in a tussle with China for the control of the global south. So again, countries in the global south are caught in the middle of this crossfire. So again, the G20 common framework has not worked. So essentially what we do have in the world are ad hoc, which is incredibly sad but also makes sense when one thinks about it. We've got ad hoc mechanisms for resolving debt. How can you have ad hoc mechanisms for resolving debt? Where the multilateral entities, multilateral agencies that are supposed to guide us through sovereign debt crisis. But we don't have those kinds of institutions by design, I think. By design because resolving debt in a fundamental way, will mean that the countries of the south, the poor, what Vijay Prashat calls the poor nations of the world can now stand on their own feet. So there is no intent to fix, there's no intent to create the kind of institutions that can resolve debt. It is surprising because it keeps happening over and over again. So you would think the smart minds of the world would think about bringing to existence institutions of debt. But no, we don't have that. What we do have are ad hoc mechanisms that are not fit for purpose and they are for many countries in the south suffer in the process. Right, Dree, of course in the dossier towards the end you also listed some of the alternatives because that is also equally important to talk about what are some of the alternative possibilities to actually resolve this crisis. And that's a multifaceted set of explanations, some of them internally what countries can do, some of them in the area of geopolitics, some of them in the area of reforming finance itself. But if you were to take two or three important, say two or three important examples of what can be done, what would you say? Well, I think the first thing, so it's to understand why it is countries get themselves into debt. I think I talked about this project financing. So on the one hand it's the expenditure side. We need to spend on these bridges, roads, power stations, which are crucial. I mean the rise of China for example, one cannot explain that rise without thinking about the power hydropower stations, the roads, the train network, et cetera. So we need to invest. So essentially what we do need are development banks, international development banks that are truly committed to finance this type of long-term infrastructure expenditures. This is why for example, the new development bank, the BRICS Bank that is now headed by former President Dilma Rousseff, is an exciting development. So I think that is a solution, one part of the solution, in reimagining development banks, like especially development banks for the global south, and essentially one of the arguments we make in the dossiers, can we see more BRICS Bank-like entities that are popping up? And then you've got on the revenue side, right? One of the reasons again why Zambia continues to borrow, many countries in the south continue to borrow, is that they're not collecting enough tax revenues, or they're not collecting enough revenues, especially many countries in the south exporters of primary commodities, right? Again, an artifact of colonialism and so on and so forth. But be that as it may, this export of commodities should in theory earn them foreign exchange, which they could use to do this infrastructure expenditures. But due to lots of nefarious activities by transnational corporations, multinational corporations, many of the countries in the south are robbed of that foreign currency through what is called delicit financial flows. So again, one of the arguments we make in the dossier, one of the policy solutions is that we should confront quite seriously, right? Devise mechanisms quite seriously of making sure that we can get a big share of this, we can recapture these flows that are illicitly leaving the continent, illicitly leaving the countries in the south, right? So if we can sort out the revenue side, we can sort out the financing side with bricks bunk like entities, I think we'll be a long way ahead in terms of preventing sovereign debt crisis of the type that Zambia is going through. Right, and we finally, of course, a lot of talk in recent times has been about de-dollarization, and that's also one of the alternatives you suggested. So how does de-dollarization fit into the puzzle? I mean, again, we have to understand that, so, international trade, right? So the idea of having a currency that is internationally traded to facilitate international trade itself is understandable and makes sense, right? We have 100 plus countries in the world, I think it's 180 countries in the world. So to easily facilitate trade, and trade is important, why do we need to trade? Because we don't all make the things that we need. Some countries make those things we make, so we need to trade. And the idea of having a currency that facilitates this trade in an effective, efficient way is a lot more. Now, the problem we have is that the current currency that does that is the US dollar, which again is weaponized by the US as a tool for foreign policy, right? They use it to impose sanctions, they use it to do all sorts of things. They can shut you out today. They will just say you're shut out of the international payment system and your people will suffer. So the dollar has not served that purpose of peaceably facilitating international trade. And that is why there are all these conversations and discussions now, quite impressive, I think, and quite encouraging to de-dollarize, which is to say, can we, A, either find ways of trading using our own currencies? For example, what is happening between, I think, China and Russia, India and Russia, Brazil and China, there's this discussion of swaps, currency swaps. So just swap our currencies and then exchange our commodities likewise. And then there's also the conversations, can we come up with maybe regional currencies, new types of currencies that can facilitate this type of trade? That the kind of currencies that are not susceptible to, that are not going to be weaponized as tools of foreign policy. So I think this is why the conversation of the dollar rises also. For the purposes of trade, it's also an important conversation because many of our countries have debt that is in dollars, right? It is really debt that is in dollars. And if we could find mechanisms of the dollar rising, if we could find mechanisms of swapping, somebody who wants to build a road or wants to build a bridge or power station and then it swaps some copper for capital imports from China, then we can avoid this problem of debt in dollars, which is often weaponized. And it's often used as a tool of American foreign policy. And exactly. So this is why this conversation of the dollar rising is particularly important when one thinks about debt. Thank you so much, Graeme, on that hopeful note we'll end this conversation, but we'll definitely get back to you for further analysis, for further insights into both the question of debt, but also, I think, very important, like you said, the question of alternatives, the question of how to break these chains that have, for too long, I think, enmeshed the countries of the global south. Thank you so much. Thank you so much for having me. And that's all we have time for today. We'll be following many such issues on people's dispatch, including that of debt, including that of the international financial institutions. So keep watching and reading people's dispatch.