Development Finance

Abstract

To spearhead development, the state needed power and resources. When additional powers were needed, the state simply arrogated them or secured them through a rubber-stamp parliament. Resources could be secured in a variety of ways:

• Use of foreign exchange reserves

• Taxation

• Inflationary finance

• Domestic borrowing

• Foreign borrowing

• Windfall from a mineral export (diamonds, gold or oil)

Foreign aid has done more harm to Africa than we care to admit. It has led to a situation where Africa has failed to set its own pace and direction of development free of external interference. Today, Africa’s development plans are drawn thousands of miles away in the corridors of the IMF and World Bank. What is sad is that the IMF and World Bank “experts” who draw these development plans are people completely out of touch with the local African reality.

—Dr. Joshat Karanja, a former Kenya member of parliament, in New African, June 1992, p.20.

I’ve never seen a country develop itself through aid or credit. Countries that have developed—in Europe, America, Japan, Asian countries like Taiwan, Korea and Singapore—have all believed in free markets. There is no mystery there. Africa took the wrong road after independence.

—President Abdoulaye Wade of Senegal, in The New York Times, April 10, 2002; p.A3.