IMF takes on the Times over Mozambique

“Mozambique, one of the few countries so far to receive debt relief under HIPC, found that one of the IMF conditions was that it had to raise the proportion of its health spending recovered from user fees from 2 per cent in 1995 to 10 per cent in 2000,” wrote Janet Bush, economics editor of The Times (9 December 1998).

The IMF was so stung by the London paper's attention to detail that it issued a statement by G E Gondwe, director of the IMF African Department. “Janet Bush's statement ... is so disconnected for its context that it actually suggests the opposite of what is true.”

Gondwe argues that “when carefully designed, user fees can help to ensure that expenditures are rationalized, with the poorest segment of the population being exempted from paying any fees for essential needs or basic social services.”

In fact, Bush is right and Gondwe is saying “the opposite of what is true.”

Two-thirds of Mozambicans live below the poverty line. Many cannot afford the existing very tiny user fees. A five-fold increase in user charge income cannot be recouped from the better off – there are simply too few of them. That means user charges must increase for the poor as well. The previous time Mozambique tried to increase user charges (in the late 1980s, by much less than this), it caused a significant fall in the use of the health service. Thus, the required five-fold increase, to be imposed over such a short period of time, must hit the poor.

The United Nations Human Development Report 1997 (p78) specifically says: “Avoid user charges except for the better off. User charges often deny access to basic services to the poor. While Columbia, Costa Rica, Indonesia and Malaysia did not resort to user charges, others did – and found that the poor suffered and revenues rose little. In Zimbabwe attendance at rural clinics fell by a quarter.”

What is clear is that Mozambique cannot increase user charge revenue five-fold only from the better off. Thus the IMF is making debt relief conditional on Mozambique going against both UNDP advice and its own experience.

Under HIPC, the IMF and World Bank boards make a decision (“the decision point”) to grant debt relief at a later date (“the completion point”). Mozambique's decision point was 7 April 1998 and the completion point will probably be 30 June 1999.

On 7 April 1998, the two Boards approved the HIPC Final Document. Paragraph 34 of that document states: “A summary of the social development indicators and targets that will be monitored under the HIPC Initiative is provided in Appendix Table 5. Satisfactory progress towards the achievement of these targets constitutes a condition for reaching completion point.”

Table 5, item 6, spells out one of these for health:

“Preparation and formal approval of new user fees legislation ...

Increase the share of receipts in recurrent health expenditure to 10% by 2000 from 2% in 1995”

User fees have not increased since 1995, therefore, it is “a condition for reaching completion point” and therefore receiving debt relief that “satisfactory progress” be made toward:

• a five-fold increase in revenue from user fees to be reached in the next two years, and
• the introduction and approval of new legislation to do this.

It is highly unusual for the IMF to demand that an elected parliament must pass legislation. It is hard to see what would constitute “satisfactory progress” toward the passage of legislation other than some sort of standing committee or all-party agreement. No legislation has been submitted and if it were, it would surely be extremely controversial. Indeed, the only possible justification for making debt relief conditional on legislation is the realisation that such a huge increase in user fees would be extremely unpopular and unacceptable, and would need to be enforced by legislation. But it raises a critical question about what right the Fund has to force an elected parliament to pass unpopular and unacceptable legislation.