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THIRD WORLD RESURGENCE

The IMF's role in the creation of famines in Somalia

How did Somalia, which in the 1970s was a grain-sufficient country, become so dependent on food imports and food aid? As Michel Chossudovsky explains, it was the IMF's intervention in the early 1980s that contributed to the crisis of Somali agriculture.

SOMALIA was a pastoral economy based on 'exchange' between nomadic herdsmen and small agriculturalists. Nomadic pastoralists accounted for 50% of the population. In the 1970s, resettlement programmes led to the development of a sizeable sector of commercial pastoralism. Livestock contributed to 80% of export earnings until 1983. Despite recurrent droughts, Somalia remained virtually self-sufficient in food until the 1970s.

The International Monetary Bank (IMF)-World Bank intervention in the early 1980s contributed to exacerbating the crisis of Somali agriculture. The economic reforms undermined the fragile exchange relationship between the 'nomadic economy' and the 'sedentary economy', that is, between pastoralists and small farmers, characterised by money transactions as well as traditional barter.

A very tight austerity programme was imposed on the government largely to release the funds required to service Somalia's debt servicing obligations to the Paris Club. In fact, a large share of the external debt was held by the Washington-based financial institutions. According to an International Labour Organisation (ILO) mission report: 'The Fund alone among Somalia's major recipients of debt service payments, refuses to reschedule...De facto it is helping to finance an adjustment programme, one of whose major goals is to repay the IMF itself...'

The structural adjustment programme reinforced Somalia's dependence on imported grain. From the mid-1970s to the mid-1980s, food aid increased 15-fold, at the rate of 31% per annum. Combined with increased commercial imports, this influx of cheap surplus wheat and rice sold in the domestic market led to the displacement of domestic producers, as well as a major shift in food consumption patterns to the detriment of traditional crops (maize and sorghum).

The devaluation of the Somali shilling imposed by the IMF in June 1981 was followed by periodic devaluations, leading to hikes in the prices of fuel, fertiliser and farm inputs. The impact on agriculturalists was immediate particularly in rain-fed agriculture but also in the areas of irrigated farming. Urban purchasing power declined dramatically, government extension programmes were curtailed, infrastructure collapsed, and the deregulation of the grain market and the influx of 'food aid' led to the impoverishment of farming communities.

Also, during this period, much of the best agricultural land was appropriated by bureaucrats, army officers and merchants with connections to the government. Rather than promoting food production for the domestic market, the donors were encouraging the development of so-called 'high value added' fruits, vegetables, oilseeds and cotton for export on the best irrigated farmland.

As of the early 1980s, prices for imported livestock drugs increased as a result of the depreciation of the currency. The World Bank encouraged the exaction of user fees for veterinarian services to the nomadic herdsmen, including the vaccination of animals. A private market for veterinary drugs was promoted.

The functions performed by the Ministry of Livestock were phased out; the veterinary laboratory services of the Ministry were to be fully financed on a cost-recovery basis. According to the World Bank, 'veterinarian services are essential for livestock development in all areas, and they can be provided mainly by the private sector (...) Since few private veterinarians will choose to practise in the remote pastoral areas, improved livestock care will also depend on "para vets" paid from drug sales.'

The privatisation of animal health was combined with the absence of emergency animal feed during periods of drought, the commercialisation of water and the neglect of water and rangeland conservation. The results were predictable: the herds were decimated and so were the pastoralists who represented 50% of the country's population. The 'hidden objective' of this programme was to eliminate the nomadic herdsmen involved in the traditional exchange economy. According to the World Bank, 'adjustments' in the size of the herds are in any event beneficial because nomadic pastoralists in Sub-Saharan Africa are narrowly viewed as a cause of environmental degradation.

The collapse in veterinarian services also indirectly served the interests of the rich countries: in 1984, Somali cattle exports to Saudi Arabia and the Gulf countries plummeted as Saudi beef imports were redirected to suppliers from Australia and the European Community. The ban on Somali livestock imposed by Saudi Arabia was not, however, removed once the rinderpest disease epidemic had been eliminated.

The restructuring of government expenditure under the supervision of the Bretton Woods institutions also played a crucial role in destroying food agriculture. Agricultural infrastructure collapsed and recurrent expenditure in agriculture declined by about 85% in relation to the mid-1970s. The Somali government was prevented by the IMF from mobilising domestic resources. Tight targets for the budget deficit were set.

Moreover, the donors increasingly provided 'aid' not in the form of imports of capital and equipment but in the form of 'food aid' . The latter would in turn be sold by the government on the local market and the proceeds of these sales (the so-called 'counterpart funds') would be used to cover the domestic costs of development projects. As of the early 1980s, 'the sale of food aid' became the principal source of revenue for the state, thereby enabling donors to take control of the entire budgetary process.

The economic reforms were marked by the disintegration of health and educational programmes. By 1989, expenditure on health had declined by 78% in relation to its 1975 level. According to World Bank figures, the level of recurrent expenditure on education in 1989 was about $4 per annum per primary school student, down from about $82 in 1982. From 1981 to 1989, school enrolment declined by 41% (despite a sizeable increase in the population of school age), textbooks and school materials disappeared from the classrooms, school buildings deteriorated and nearly a quarter of the primary schools closed down. Teachers' salaries declined to abysmally low levels.

The IMF-World Bank programme has led the Somali economy into a vicious circle: the decimation of the herds pushed the nomadic pastoralists into starvation, which in turn backlashed on grain producers who sold or bartered their grain for cattle. The entire social fabric of the pastoralist economy was undone. The collapse in foreign exchange earnings from declining cattle exports and remittances (from Somali workers in the Gulf countries) backlashed on the balance of payments and the state's public finances, leading to the breakdown of the government's economic and social programmes.

Small farmers were displaced as a result of the dumping of subsidised US grain on the domestic market combined with the hike in the price of farm inputs. The impoverishment of the urban population also led to a contraction of food consumption. In turn, state support in the irrigated areas was frozen and production in the state farms declined. The latter were to be closed down or privatised under World Bank supervision.

According to World Bank estimates, real public sector wages in 1989 had declined by 90% in relation to the mid-1970s. Average wages in the public sector had fallen to $3 a month, leading to the inevitable disintegration of the civil administration.

A programme to rehabilitate civil service wages was proposed by the World Bank (in the context of a reform of the civil service), but this objective was to be achieved within the same budgetary envelope by dismissing some 40% of public sector employees and eliminating salary supplements. Under this plan, the civil service would have been reduced to a mere 25,000 employees by 1995 (in a country of six million people). Several donors indicated keen interest in funding the cost associated with the retrenchment of civil servants.

In the face of impending disaster, no attempt was made by the international donor community to rehabilitate the country's economic and social infrastructure, to restore levels of purchasing power and to rebuild the civil service: the macroeconomic adjustment measures proposed by the creditors in the year prior to the collapse of the government of General Siyad Barre in January 1991 called for a further tightening over public spending, the restructuring of the central bank, the liberalisation of credit (which virtually thwarted the private sector) and the liquidation and divestiture of most of the state enterprises.

In 1989, debt servicing obligations represented 194.6% of export earnings. The IMF's loan was cancelled because of Somalia's outstanding arrears, while the World Bank had approved a structural adjustment loan for $70 million in June 1989 which was frozen a few months later owing to Somalia's poor macroeconomic performance. Arrears with creditors had to be settled before the granting of new loans and the negotiation of debt rescheduling. Somalia was tangled in the straightjacket of debt servicing and structural adjustment; the rest is recent history.

Somalia's experience shows how a country can be devastated by macroeconomic policy: there are many Somalias in the developing world and the economic reform package implemented in Somalia is similar to that applied in more than 80 developing countries. But there is another significant dimension: Somalia is a nomadic pastoralist economy, and throughout Africa the nomadic livestock economy is being undermined by the IMF-World Bank programme in much the same way as in Somalia.           

Michel Chossudovsky is a Professor of Economics at the University of Ottawa in Canada. This article appeared in the November 1993 issue (No. 39) of Third World Resurgence.

*Third World Resurgence No. 251/252, July/August 2011, pp 23-24


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