IMF boss warns against expensive consultants for Africa

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Earlier this year, International Monetary Fund (IMF), managing director, Christine Lagarde, spoke on something many African policymakers might have missed, which is unfortunate because it is stirring up a gathering storm.

Lagarde said instead of spending on expensive consultants, low-income countries should raise more domestic revenues and cut back on elephant projects.

Lagarde told poor countries representatives, including heads of state at the Davos World Economic Forum to stop using global consultancy firms to write development strategies.

Consultancy UK says consulting spending in the public sector has increasingly come under the spotlight in the past few years, both in developing and leading economies. As such, comments in line with Lagarde’s would be relatively uncontroversial, were they not coming from one of the chief drivers of privatisation – and champions of market solutions over state intervention.

Lagarde was similarly accused of hypocrisy following comments at the same event one year ago. She said “I hope people will listen now”, in allusion to the wave of reactionary populism currently sweeping developed economies, and harking back to another speech she made at Davos in 2013, when she warned that economic “inequality is corrosive to growth; it is corrosive to society.”

The IMF has been expressing public concern about inequality since 2010, but without translating this into concrete action within the IMF’s own policies and programs, according to research by British political economists Alex Nunn and Paul White.

According to media reports, at Davos 2019, Lagarde singled out inefficient spending on consultants for criticism at an event about funding the current round of sustainable development goals.

She even ordered any representatives of ‘the McKinseys and Boston Consulting Groups’ or any other consultancy firms in the room to listen to her as she delivered an uncomfortable message about their work.

The former French government minister said low-income and emerging-market economies had to raise more revenue themselves domestically and cut white elephant projects and corruption.

She argued the private sector had a key role to play if poorer countries were to ever achieve the 17 development goals set by the UN.

But she warned: “I’m looking around to see whether there are any of the McKinseys and Boston Consulting Groups, and if there are please listen to me.

“I see many, many low-income countries and emerging-market economies spend millions of dollars commissioning consultants to build their strategy plan. I would recommend some saving be made by taking the 17 principles, the actionable items, and start with that.

“From there, the consultants can actually do their job of putting it into reality. But don’t reinvent it — it’s right there. So much is wasted. That’s part of the inefficient spending that can actually be saved.”

The comments may spark controversy not only in the consultancy industry, but also among critics of the IMF itself. The IMF has a tarnished image in many parts of the world for its heavy-handed promotion of free-market reforms in indebted countries over the past few decades.

The sight of a senior IMF figure now urging developing countries to cut down on their use of imported private sector expertise may raise eyebrows.

 

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