Country Study 16

Until the 1980s, the Ivory Coast seemed to be one of the most successful examples of economic development, enjoying sustained growth and rising per capita incomes. This process was, however, seen to be fragile in the 1980s when it was brought to an abrupt halt by the slide in the prices of the country's principal exports, notably coffee and cocoa. From 1981-84, the economy contracted in real terms. An initial stabilization programme in 1981-83 supported by the International Monetary Fund failed to achieve its goals; a second, in 1984, was more successful but the author argues that this was due more to the recovery in the terms of trade rather than the contractionary policies pursued - which would otherwise have brought about a deep recession. The relevance of this experience of the early 1980s to current policy-making became clear again in the renewed crisis of 1986-87 when coffee and cocoa prices collapsed again: the wholesale price index of coffee halved in the 12 months to April, 1987, causing export earnings to dwindle and making it impossible to continue servicing foreign debt in full. The debt moratorium and rescheduling of 1987 were the inevitable results. Equally inevitably, this crisis brought the Fund and Bank back to centre-stage with requests for further assistance including further government spending cuts, increased taxation, freezes on public service salaries and ceilings on government staff hirings. It is therefore all the more important to draw the right lessons from the earlier experiences with Fund-supported stabilization programmes analysed in this paper: basically, the main lesson is that the Ivorian economy would have been better able to face the harsh conditions of the 1980s if it had not been so dependent on foreign markets and capital and that there are policies which would reduce this vulnerability in the long run. These should aim to diversify exports, broaden the domestic market, reduce reliance on foreign capital and factors of production. IMF-type policies, by contrast, tend to increase such vulnerability by placing so much stress on export promotion at a time when markets are weak or vanishing. The irony is that a selective de-linking of the economy from the world economy and the international flow of capital is being brought about by the very market forces which the international institutions urge on developing countries.