For the first since South Sudan attained its independence in July 2011, the International Monetary Fund (IMF) has granted Africa’s youngest nation a $52million disbursement under the Rapid Credit Facility initiative.
The funding, allocated on 20th November this year, is aimed at helping the country’s economy weather the shock of the COVID-19 pandemic according to Amina Lahreche and Niko Alfred Hobdari, the Deputy Division Chiefs at the IMF.
Headed by Kristalina Georgieva, the Bretton Woods institution accompanied its largesse with a message to the government of South Sudan – that of taking a paradigm shift from reliance on financial handouts from the donor community.
South Sudan has received a series of donations in the wake of the coronavirus pandemic and catastrophic floods, which demolished homesteads and left nearly one million people displaced in a country where more than half of the population was already food insecure, a crisis compounded by the locust invasion.
Donor support, IMF notes, “largely focused on humanitarian operations”, a phenomenon which could continue amid worsening welfare of the citizens in various parts of the country flagged by natural disasters and intercommunal feuds.
Attracting more financing for development requires not just accountability but also additional reforms and economic diversification far-detached from reliance on the oil sector.
“South Sudan would benefit from diversifying its economy away from oil. Accomplishing this will require large investments in infrastructure, human development, and stronger institutions,” said the Geneva-based organization.
The IMF has reinforced a stance held by economic experts, academics, and critics of foreign aid. Dambisa Moyo, the author of ‘Dead Aid: Why Aid is not Working and How there is a Better Way for Africa’ says foreign aid remains a catalyst for underdevelopment and acute poverty in most developing countries.
Since 1970, nearly a trillion dollars have been allocated for aid in Africa, yet countries in the sub-Saharan part of the continent continue to flounder in a seemingly never-ending cycle of corruption, disease, poverty, and aid-dependence.
Moyo argues that the aforementioned phenomena are prevailing because of all those financial handouts stemming from the widespread Western belief that ‘the rich should help the poor, and the form of this help should be aid’.
Instead, aid has helped make the poor poorer, and growth even slower. In Moyo’s own startling words, “Aid has been and continues to be, an unmitigated political, economic, and humanitarian disaster for most parts of developing world”. Precisely, aid (like Karl Kraus said of Freudianism), is the disease of which it pretends to cure.
For more than three decades, according to the global economist, the most aid-dependent countries have shockingly exhibited an average annual growth rate of minus 0.2 percent, which is far better than the minus 10.79% decline recorded by South Sudan as of 2018 and 2019.
History tells us that dependency on aid has catapulted the poverty rate in many African countries. Between 1970 and 1998 (of course before the Sudan Referendum) when aid flows to Africa were at their peak, poverty rose from 11% to an astonishing 66 percent.
Why? Moyo’s crucial insight is that the receipt of concessional loans and grants has much the same effect in Africa as the possession of a valuable natural resource: it’s a kind of a curse because it encourages corruption and conflict, while at the same time discouraging free enterprise.