Introduction
Masawa, a fictional small country in southwestern Africa, is currently facing many economic setbacks. This has prompted the president, Dr. Sabankwa, to consider whether to accept an International Monetary Fund (IMF) structural adjustment loan to improve the country’s situation. As he weighs his options, he must consider the potential political, economic, and social repercussions of the IMF’s five proposed measures. This work will explore the position of Dr. Sabankwa’s cabinet member and whether they should accept the IMF plan or suggest modifications. It will also examine the arguments Dr. Sabankwa can make to convince the IMF officials to agree to his proposed modifications.
Proposed Position as a Member of Dr. Sabankwa’s Cabinet
A member of Dr. Sabankwa’s cabinet should favor implementing the IMF’s recommended measures with some modifications. As a cabinet member, they would be aware of the difficulties of implementing the IMF’s recommendations. According to Ajami et al. (2015), their idea would be to cut subsidies on food gradually and slowly to reduce the political and economic hardship that this decision may cause. Devaluing the exchange rate by 40% would make it easier for people to adjust to the changes and reduce the economic shock associated with the devaluation. Still, they should suggest that this be done over a while.
As for the privatization of state-owned enterprises, they should suggest that the government provide financial and technical assistance to the private sector to enable it to take over the operations of these enterprises. This would ensure that the privatization process is smooth and successful. The cabinet member should propose gradually reducing imports to minimize the impact on the growth rate. They should recommend reducing government expenditure by cutting government staff and salaries (Ajami et al., 2015). Still, this should be done in a way that does not hurt the morale of the existing team.
Why Dr. Sabankwa Should Accept the IMF Plan Modified
Dr. Sabankwa should accept the IMF plan and suggest modifications to mitigate the potential for political unrest resulting from its implementation. The IMF plan is the best option for Masawa, as it offers access to much-needed financing and provides the country with a framework for economic development.
Suggested Modifications to the IMF Plan
To reduce the potency of political unrest, Dr. Sabankwa should suggest modifications to the IMF structural adjustment plan that focus on alleviating the measures’ impact on the country’s most vulnerable populations and providing additional support to the urban impoverished by introducing a social safety net, such as a food voucher program, to provide affordable food. For example, he could indicate that food subsidies should be gradually phased out, rather than eliminated all at once, to minimize the disruption to food supplies for the urban underserved population. Another suggestion would be to increase public investment in infrastructure and services to create jobs and boost the economy.
Arguments Convincing IMF Officials to Approve the Modifications
To convince IMF officials to agree to these modifications, Dr. Sabankwa could argue that they are necessary to successfully implement the structural adjustment plan. Also validating the arguments point to the potential political unrest resulting from the IMF plan’s abrupt implementation, and these modifications will help prevent this (Ajami et al., 2015). He can also argue that the modifications will ensure that the economic gains of the plan are shared by all citizens rather than just the wealthy and powerful. Additionally, he could point to the potential long-term economic benefits that can be gained from the modifications, such as increased employment and improved infrastructure.
Conclusion
In conclusion, the IMF’s structural adjustment measures should be used gradually and carefully, emphasizing minimizing potential drawbacks and optimizing potential benefits. Dr. Sabankwa ought to approve the IMF plan in its current form while proposing changes to lessen the likelihood of political instability. These changes will contribute to the proper execution of the plan and the equitable distribution of the financial benefits among all citizens. Dr. Sabankwa should be able to persuade the IMF authorities to accept these changes by presenting a compelling case for them.
Reference
Ajami, R. A., & Goddard, G. J. (2015). International Business: Theory and Practice (Vol. 3rd edition). London: Routledge.