Foreign Relations of the United States, 1981–1988, Volume XLI, Global Issues II

259. Letter From Acting Secretary of the Treasury McPherson to President Reagan¹

Washington, July 18, 1988

Dear Mr. President:

I am submitting herewith a report on the status of your Initiative to End Hunger in Africa and on Africa’s economic situation and future prospects. This report was prepared by the Departments of State and the Treasury in accordance with Executive Order 12599 of June 23, 1987.

I would like to commend the outstanding leadership Alan Woods has provided in preparing the enclosed report and, more broadly, as Chairman of the Inter-Agency Coordinating Committee for Sub-Saharan Africa.

Respectfully,

M. Peter McPherson

Enclosure

Report to the President Prepared by the Task Force To End Hunger in Africa²

Washington, undated

INITIATIVE TO END HUNGER IN AFRICA

Report to the President

Mr. President, in March 1987³ you announced an Initiative to End Hunger in Africa. You took this step in response to the famine of 1985, and a new spirit of economic reform on the part of Africa’s leaders.

Your Initiative was based on the principles that:

1. Hunger has to be attacked at its roots, the lack of long-term economic development and growth.

2. To achieve real growth, African countries will have to reform their economic policies and develop their private sectors.

3. To support African reform, bilateral and multilateral aid donors have to follow a coordinated and long-term development strategy.

This is a report on the status of your Initiative, and on Africa’s economic situation and future prospects.

Conclusions. Our principal conclusions are that:

—Africa must cope with severe economic problems, resulting from adverse external economic developments, droughts that have led to disastrous famines, deficient government economic policies, and a fundamental lack of physical and human resources.

—In recent years famines have been dealt with through substantial emergency assistance. Africa also faces a long-term food gap, however. Population and food needs are growing faster than production. If current trends continue, Africa will have a large food deficit by the year 2000. Food aid from the U.S. and other developed countries will help, but the only way to avoid this tragedy is to substantially increase agricultural productivity and economic growth.

—Because of its high rate of population growth (3% a year), Africa has to achieve high economic growth (5–6% a year) to make real gains in per capita income. This is much higher than past growth in Africa.

—Such growth cannot be achieved without fundamental economic policy reform in Africa and sustained financial support from the developed world.

—In the last few years African leaders have recognized the necessity of reform. Showing commendable courage, many have taken difficult steps to implement reforms, often with high political costs. For some countries, these efforts are beginning to pay off in increased economic growth.

—In 1987 the developed countries agreed to provide additional capital to Africa through international financial institutions to further support economic reform. This assistance should meet the financing needs of the heavily-indebted African countries that make a real reform effort, and provide for some real growth through 1990.

—We will reinforce these efforts and continue to help the Africans meet their longer-term development needs through our economic assistance.

Hunger in Africa.

Famine. People all over the world were shocked and horrified by the scenes of African famine in 1984–85. They responded with a generous outpouring of private donations and government aid, which significantly reduced the loss of human life.

In 1988 there is famine again in Africa, in Ethiopia, Mozambique, and other countries.⁴ This time the donor community is better prepared to deal with the crisis, but delivering relief may be more difficult, primarily because of political factors. In Ethiopia the government is denying access to relief workers and giving higher priority to fighting the civil war than to feeding the people. In Mozambique a virulent guerrilla war is blocking relief in parts of the country.

Africa’s Long-term Food Gap. Beyond the current famine emergencies, Africa faces a long-term food problem, rooted in the perilous balance between population and food production.

Africa’s population has been growing faster than agricultural output for the last 20 years. Sometime in the 1970’s Africa passed the point where it could meet its food needs from internal production.

It has the highest population growth rate in the world, about 3% a year. At this rate Africa’s need for food will double in the next 22 years. However, if current trends continue, food production will not grow fast enough to keep up with demand, leaving a growing “food gap.” Africa will become even more dependent on imported food—commercial imports and food aid.

The problem is that some African nations will soon need such large amounts of imported food that it is not clear where it will come from. Africa’s economies are not growing fast enough to pay for the needed food on commercial terms, without diverting large amounts of foreign exchange from crucial investment. And no one, in Africa or in the West, wants to see Africa permanently dependent on massive food aid, even if the developed world could afford to provide it.

Thus Africa still faces a long-term food crisis. The scope of the problem is indicated by recent figures from the International Food Policy Research Institute (IFPRI). IFPRI estimates that, if past trends continue, Africa will have a food deficit of 47 million metric tons by the year 2000. This is four times the amount of food that Africa currently receives from outside.

The Imperative of Growth. In dealing with Africa’s food problems, both immediate and long-term, it is important to attack the root of the problem—Africa’s lack of development and growth. The only way to end hunger in Africa on a sustainable basis is to increase production and growth on the continent, so that Africans can feed themselves.

That is the aim of the End Hunger Initiative—to address the cause of hunger through growth. Our approach is to promote reform of Africa’s economic policies, supported by coordinated assistance from the developed world.

To understand why this formula has been chosen, one must go back and look at the history of Africa’s economic crisis and what it is going to take to deal with it.

Africa’s Problems and the International Response.

Roots of the Crisis. Africa’s economic crisis began in the 1970’s with the oil price rises. The crisis worsened in the early 1980’s, due to the global recession and a precipitous drop in the prices of primary commodities, Africa’s main exports. These problems were compounded by the effects of widespread drought in 1984 and 1985, as well as long-term environmental degradation.

At first, the African countries relied on borrowing abroad for resources, but these funds were often used to maintain imports for consumption or for unproductive investments. Eventually, the servicing of their debts became an additional burden on African countries.

Bad domestic economic policies and structures were also an important factor in the African countries’ decline. Almost across the board, African governments after independence set up statist economic systems, which stifled economic production and growth. Government policies were characterized by state-controlled prices, excessive subsidies to urban consumers and burdens on rural agricultural producers, overvalued exchange rates, and inefficient parastatal corporations.

The people of Sub-Saharan Africa were hit hard by the economic decline. By the mid 1980’s, the living standards of most countries in the region had regressed to the levels they had at the time of independence, nearly 30 years before.

One manifestation of this decline was a fall in per capita production of food. Because of high population increases, slow growth in agricultural production, and environmental degradation, per capita food production fell by an average of 3% a year from 1972 to 1983. This contrasts with the record in Asia and Latin America, where per capita food production rose over the same period.

The Policy Reform Movement. In the early 1980’s there was a growing realization that substantive changes in government policies and economic structures of the African countries were required if they were to achieve real growth. This new thinking started in the donor community. It gave rise to a new approach to development, called “structural adjustment” or “policy reform.”

The basic concept behind the structural adjustment/policy reform approach is that fundamental changes in economic policies and structures will result in more efficient use of resources and, in turn, greater economic growth. Reform measures are typically aimed at such objectives as making markets work better, correcting past biases against agriculture, and allowing the private sector to develop and function more freely.

Policy reform gained growing acceptance among the donors from 1980 on, with the United States playing a lead role. By 1986 African leaders themselves came to the conclusion that the old system was unworkable, and strongly endorsed the idea of reform at the UN Special Session on Africa of that year.

Difficulty of Reform. Implementation of reform has proven to be difficult. Part of the problem is that the changes needed are fundamental and far-reaching in scope. They often cause large dislocations with immediate costs.

Also, governments undertaking reforms generally have to operate under very adverse economic conditions resulting from past decline. They face major constraints on domestic resources and foreign exchange, and sharply depressed levels of personal income. These conditions make reform much more painful.

Many governments have demonstrated, however, that they have the political courage to persist with difficult reform programs. They have met and withstood pressures from groups in their societies, including politically powerful interests.

In many cases, the commitment to reform is sustained by the recognition that failure to reform now will necessitate much larger adjustments later and that the short-term costs are outweighed by the long-term benefits.

Concerns have been raised about the short-term impact of reform programs on the poor in particular. Some have criticized policy reform as regressive. In fact, policy reform itself is overwhelmingly progressive—favoring small-holder farmers, who make up the majority of the poor in Africa, and focusing losses on government employees and urban elites.

Most of the costs to the poor have been due not to market-oriented reforms, but to cutbacks in consumption and government spending required to adjust to past depressed growth. Multilateral and bilateral donors are instituting programs to ameliorate the impact of such measures on the poor.

International Response. Recognizing both the imperative of economic reform and the reforming countries’ need for financial support, the donor community agreed in 1987 to a number of initiatives to provide increased assistance to African countries pursuing reform programs.

Under its Special Program for Africa, the World Bank increased its allocation of concessional resources for 17 heavily-indebted African countries that are undertaking reforms. The bilateral donors also agreed to provide $3 billion in additional program aid, to be extended in cooperation with the World Bank.

In addition, the African Development Bank received increased funding for Africa, and the IMF established an expanded $8 billion soft loan facility that will go mainly to Africa, the Enhanced Structural Adjustment Facility (ESAF).

These programs combined will give these countries about $3 billion more per year for the next three years, which will allow them to increase critical import levels for the first time in this decade.

Even before the recent steps to increase resources, there were signs that policy reform was paying off. Africa made modest economic gains in 1985 and 1986 (although there was back-sliding in 1987).

Countries which have sustained reform programs—such as Ghana, Guinea, Gambia, and Senegal—had significant economic growth of some 4% a year during 1986–87. Countries not pursuing economic reform posted much lower growth rates, of less than 1% a year. Likewise, food production rose more rapidly in countries pursuing economic reforms than in those that did not.

Various factors, including improved weather and positive developments in the industrial countries, contributed to these gains, but the improved policy environment deserves a great deal of credit.

Africa’s Prospects.

Continuing Problems. Today Africa is at an uncertain stage. The previous decline has been slowed, but a decisive turn-around has not been achieved. It is hoped that the new resources will allow Africa to make greater gains over the next five years, and the World Bank is predicting modest per capita income gains.

However, even if there is progress overall, problems will persist.

First, future gains will not be evenly distributed. The new resources will be targeted on countries that are making serious reforms. At present this leaves a number of countries outside the system, either because they haven’t joined the reform movement, have fallen off the reform wagon, or are too far in arrears on debt to be helped. Thus we may have growing variation in Africa, with progress by some and continuing decline by others.

Second, even if there is general economic advance in Africa, there may be recurring periods of famine. Famine is going to continue in Mozambique as long as most of the country is engulfed in war. And in Ethiopia famine will continue, and probably get worse, as long as military conflicts persist and as long as the Ethiopian government continues to follow bankrupt agricultural policies. If Ethiopia doesn’t change these policies, it will face a permanent and growing food deficit.

The Longer Term. Africa’s long-term prospects are brighter now but also uncertain. With its population growth rate of 3% a year, the African countries have to achieve high economic growth (5–6% a year) to make significant gains on a per capita basis. And they will have to sustain this high level of growth for many years if they are to reach the levels of personal income that, in other areas of the world, have been associated with declining birth rates and a faster pace of development.

This is far above what African countries have achieved in the past (on average, 1–2% growth over the last 15 years). Clearly there will have to be a change in the way they do business, to achieve a major increase in productivity and growth.

This is why sustained commitment to reform on the part of Africa and a sustained program of assistance from the West, the precepts of the End Hunger Initiative, are so important. Nothing less will have a chance of success.

Even with reform and outside help, Africa will face a tough battle. Policy reform is not a quick fix. It involves fundamental and complex changes, and will have to be continued for many years. Greater attention will have to be paid in future years to improving the working of agricultural and financial markets, spurring domestic and foreign investment, and expanding Africa’s export capacity.

Moreover, Africa will have to overcome some of the most daunting obstacles to development in the world: underdeveloped infrastructure, a shortage of educated people, worsening environmental deterioration, entrenched attitudes on family size, and the AIDS epidemic. All told, Africa is clearly the development challenge of our time.

The Hunger Initiative.

Content. Ending hunger in Africa through economic growth is a very ambitious goal. It will require determined efforts by Africa’s leaders and its people and coordinated programs by Western donors for many years.

The End Hunger Initiative commits the United States to an active role in this effort. Although our own budget problems at home limit the additional resources we can contribute at this time, there are definite steps that the U.S. can and will take:

—First, we will continue to stress the importance of policy reform and private sector development in our own programs, and, to the extent we have influence, in the programs of the World Bank and other international financial institutions.

—Second, we will continue to work with the World Bank and others to improve the coordination of multilateral and bilateral assistance for Africa.

—Third, we are examining the full range of U.S. policies that affect Africa—aid, food aid, debt, and trade and investment policies—to ensure that they are contributing as much as possible to Africa’s long-term development.

—Fourth, we are encouraging the involvement of U.S. businesses and private voluntary organizations in Africa.

A special inter-agency coordinating committee has been created in the Executive Branch to oversee the Initiative’s implementation. This committee is chaired by the Administrator of A.I.D. and co-chaired by the Deputy Secretary of the Treasury; it includes senior representatives from all agencies that have programs affecting Africa.

The following actions have been taken, or are underway, to support the goals of the Initiative. (A detailed summary of actions taken under the Initiative was provided to Congress in A.I.D.’s fiscal year 1989 Congressional Presentation.⁵)

U.S. Economic Assistance. The End Hunger Initiative called for a more flexible assistance tool to deal with Africa’s problems. In fiscal year 1988 Congress established a new Development Fund for Africa, which will provide more constancy in Africa funding and allow A.I.D. greater flexibility in the management of its Africa programs. Congress also increased Africa funding moderately, in spite of a decline in foreign aid overall.

A.I.D. will use the flexibility of the Development Fund to:

—Make U.S. assistance more performance-based by shifting resources to countries and programs where results are being achieved.

—Integrate non-project and project aid in a more coherent package.

—Continue support for critical long-term programs in child survival and health, population, environment, and agriculture.

During fiscal years 1988 and 1989 significant changes will be made in the allocation of U.S. assistance, increasing aid to countries that are undertaking economic reform, and reducing aid to countries that are not.

The Development Fund will also allow A.I.D. to tailor its programs more closely to the needs of individual countries. This involves coordinating project and non-project aid, including food aid; addressing both policy problems and technological constraints in key sectors; and opening up opportunities for people and non-governmental organizations working at the grass-roots level.

A.I.D. will not duplicate the macroeconomic activities of the World Bank and the IMF. Instead it will focus its policy reform efforts on the sectoral level (especially agriculture), where policy changes have to be integrated with grass-roots development. This is an area where A.I.D., with its experienced in-country staffs, has a comparative advantage.

A.I.D. is also exploring methods for expanding private sector activity, particularly by improvements in financial markets.

Finally, because of their overwhelming importance for Africa’s long-term development, A.I.D. is placing special emphasis on programs for family planning, natural resource protection, and sustainable agriculture.

Five new population projects will be started in Africa next year. Major new natural resource management activities have been begun. In agricultural research A.I.D. is playing a key role in funding national, regional, and international research institutions, and in cooperating with the World Bank in coordinating donor programs.

Debt. Various international actions have been taken to ease Africa’s debt burden. These include extensive rescheduling of bilateral debt through the Paris Club, extension of grace periods and easing of repayment terms in the Paris Club, and forgiveness by some donors.

The greatest help in this area will be through additional resources, provided by the programs cited earlier for assisting debt-distressed, reforming countries (increased funds from the World Bank and African Development Bank, the new donor commitments of program aid, and the IMF ESAF).

At the recent Toronto Economic Summit the major developed countries agreed to ease debt servicing burdens of the poorest, most heavily indebted countries by allowing official creditors greater flexibility in Paris Club reschedulings. Under this approach, as part of a Paris Club rescheduling, creditors could write off debt, reschedule at concessional interest rates, or provide longer maturities.

Donor Coordination. U.S. assistance to Africa represents only about 8% of total developed country economic assistance to the region. Therefore, it is vitally important for the U.S. to work with other bilateral donors and multilateral lenders. For this reason, better coordination of programs and greater consensus on the need for policy reform are central elements of the Initiative.

Progress has been made in both areas. Coordination of regular donor programs has improved in the last year due to increased efforts by the World Bank and the UN Development Programme, actively supported by the United States. And the World Bank is taking a strong lead in coordinating the newly-committed program aid. Today the policy reform movement has achieved a broad consensus of support among the donors.

Food Aid. The United States made some progress in fiscal year 1988 in improving the use of food aid to support development and policy reform in Africa, although these efforts were hampered by the large levels of food required for emergency relief last year. The Coordinating Committee is looking at ways to increase the effectiveness of food aid in Africa in 1989 and beyond.

Conclusion. The goal of ending hunger in Africa is daunting, but not impossible. Twenty years ago people thought that hunger would never be ended in India, yet that country is now self-reliant in food.

The development challenge in Africa is a long-term one, but the End Hunger Initiative is an important first step. It will have to be continued by future administrations.

We hope that the Initiative will help mobilize and unite people around a truly worthy goal—the sustainable end to hunger in Africa.

• John C. Whitehead
  Acting Secretary of State
• M. Peter McPherson
  Acting Secretary of the Treasury

1. Source: Reagan Library, Rodman Files, End Hunger Initiative: 06/15/88–08/01/88. No classification marking.
2. No classification marking.
3. See footnote 2, Document 256.
4. In an unsigned memorandum on May 20 to Alison Fortier, Rosenberg discussed the food shortages in Ethiopia and stated: “The President is personally taken with this potential tragedy.” (Reagan Library, Rosenberg Files, Aid to Ethiopia 02/09/1988–05/20/1988)
5. See Alan Woods, An Investment in Global Growth: The Administrator’s Statement for the Fiscal Year 1989 Congressional Presentation, Washington, DC: U.S. Agency for International Development (1988).