[stop-imf] ZNet/Naiman: IMF/WB, grants and reparations

[Robert Weissman]

---------- Forwarded message ----------
Date: Thu, 16 Aug 2001 09:04:13 -0400
From: Michael Albert <sysop@zmag.org>
To: znetcommentary@tao.ca
Subject: ZNet Commentary / Robert Naiman / World Bank & Reparations /
    August 17

Today we have two from Robert Naiman...one on World Bank Grants, the
other on Reparations. And sustainers PLEASE note:

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World Bank Grants Would Reduce Poor Country Debt Without Cost to U.S.
By Robert Naiman

President Bush proposed in Genoa that up to 50% of the World Bank's
lending to the poorest countries be converted to grants focused on
education, health care, access to clean water, and sanitation. This
would be a step towards addressing the unbearable external debt burden
of poor countries. The World Bank claims that the proposal would require
increased contributions from the United States to compensate the World
Bank for the loss of loan repayments, implying that poor countries would
suffer under President Bush's proposal if U.S. contributions were not
increased.

The World Bank's implication is false. If there were no increase in U.S.
contributions, the resources available for World Bank loans would
decrease in the future. It does not follow that this would hurt poor
countries. A shift from loans to grants would not result in a reduction
of net flows from the World Bank to the poorest countries, if we assume
that the set of "poorest countries" is fixed for the foreseeable future.
Furthermore, if 50% of World Bank loans to poor countries were converted
to grants, it would reduce poor country debt by about $800 million a
year. Such a debt reduction would match debt relief proposals backed by
some development organizations.

The World Bank's lending arm to poor countries, the International
Development Association, loaned $4.4 billion last year. These loans are
about 2/3 subsidized; that is, each dollar loaned is equivalent to a
grant of 64 cents and a market rate loan of 36 cents. If $2.2 billion
were used for pure grants, it would result in $800 million less debt
($2.2 billion times 36 per cent.)

Of course, there would be some consequences for World Bank lending.
Converting these loans to grants would cause the World Bank to have less
money in the future. These loans have a 10 year grace period, so
converting half of them to grants would mean that 10 years from now the
World Bank would have $800 million less, in present dollars. And
therefore the World Bank would have $800 million less to lend, 10 years
from now.

However, focusing on the reduction in lending alone is misleading,
because this would have no effect on net flows from the World Bank or
from the U.S. to poor countries. The $800 million the World Bank won't
have is $800 million it won't take from the poor countries. Poor
countries won't be worse off as a result of not having the World Bank
take $800 million from them and lend it back to them.

This wouldn't necessarily be true if, as a result of the World Bank's
largesse and helpful advice, the poorest countries took off
economically, so that ten years from now they were no longer needy, and
at that time there were some other countries which were now the
"poorest." Then it might make sense to transfer money from the formerly
poor countries, now rich, to some other countries that were now poorer.
But few analysts believe that such a take-off is plausible. The poorest
countries are not likely to change their relative position in the world
economy for the foreseeable future. Indeed, World Bank loans and advice
have not enabled these countries to increase their economic growth in
the past.

There is broad consensus that a much larger share of external assistance
to these countries should be directed to basic human needs such as
education, health, clean water, and sanitation. Such expenditures cannot
necessarily be expected to contribute to productivity and economic
growth within the next 10 years. If children stay in school to age 14,
then policies such as universal education and health care for children
would not show up in productivity statistics for 14 years after birth. A
loan for education or health care today will not necessarily create
increased capacity to service debt 10 years from now, and the money to
service that debt would have to be diverted from something else.

Some might favor loans over grants for other reasons. But there is no
reason to expect that substituting grants to the poorest countries for
World Bank loans will require more money from the U.S. or reduce these
countries' access to resources.

------

Reparations Should Include Universal Access to Health Care and Education
By Robert Naiman

At the end of August in South Africa, the United Nations will convene
the "World Conference Against Racism." News reports say that the U.S.
and European governments have opposed efforts by African countries to
address demands for "reparations" for slavery and colonialism and have
threatened to boycott the conference or downgrade their representation
if the issue of reparations is on the agenda.

The discussion of reparations for slavery and colonialism represents an
opportunity for new thinking about the serious problems facing Africa
today. While Africa has suffered more than its share of corrupt and
dictatorial governments, many of Africa's problems are also rooted in
decisions taken outside of Africa. Many of the harmful policies imposed
in the past continue into the present. In Africa, the past didn't go
anywhere. It's not even past.

Consider the HIV/AIDS crisis in Africa. External forces did not create
AIDS in Africa. But external forces have undermined efforts to deal with
the epidemic.

Multinational pharmaceutical corporations and Western governments have
used lawsuits and the threat of trade sanctions to sabotage efforts by
poor countries in Africa and elsewhere to make available anti-AIDS drugs
that could save millions of lives. The drug companies have vigorously
opposed licensing generic drugs to compete with brand-name drugs violate
international trade rules, even though such "compulsory licensing" is
explicitly permitted by national and international laws.

The Western governments obstructing access to essential medicines for
poor countries are also largely responsible for the destruction of the
public health infrastructure in Africa and other poor regions through
the policies of the International Monetary Fund and the World Bank. The
IMF and the World Bank have made African governments cut health care
spending, forced African governments to divert resources from public
health and education to debt service, and compelled African government
to impose "user fees" or service charges on access to primary health
care and education, a policy that continues to the present day. Such
user fees, not surprisingly, have kept kids out of school and blocked
access to lifesaving medical treatment. The drug companies and Western
governments say that drug prices are not the issue because Africa lacks
the health infrastructure to deliver AIDS drugs. Sounds like the boy who
killed his parents and asked for mercy because he was an orphan.

In October, Congress passed legislation requiring the U.S. to oppose
user fees on health and education at the World Bank and the IMF. But the
US Treasury Department immediately proceeded to violate both the letter
and the spirit of the law. In December, the "Poverty Reduction Strategy
Paper" [PRSP] for Tanzania came before the IMF and World Bank Boards.
Approval of the "PRSP" by the IMF and the World Bank is required for
poor countries to get debt relief. The PRSP for Tanzania included user
fees on health care.

But leaked minutes of the secret World Bank Board meeting where the
Tanzania PRSP was discussed show that the U.S. representative to the
World Bank failed to raise any objection when user fees on health care
in Tanzania were discussed. Moreover, an IMF Board member stated
recently that when the IMF discussed the Tanzania PRSP, the Canadian and
British representatives objected to user fees on health care, but the
U.S. representative "shot them down."

Last week, Congress held a hearing on IMF and World Bank reform.
Representatives Sanders, Carson, and Schakowski asked Treasury official
Bill Schuerch why Treasury had not complied with the law. Schuerch's
excuse was that the Tanzania PRSP was "not a loan" and that the IMF and
the World Bank did not "approve" it, they only "endorsed" it.

Schuerch was grasping at straws. The dictionary says "approve" and
"endorse" are synonyms. The law said that the U.S. had to oppose a "loan
or debt relief action" that included user fees on health, and
endorsement of the Tanzania PRSP was clearly a "debt relief action."

Treasury's refusal to comply with the law shows how U.S. policies in
Africa are frozen in the past. We need to shake up how the U.S.
government behaves in Africa and other poor areas of the world. If the
demand for reparations rattles the U.S. government a little, it's all to
the good.