[stop-imf] Action Alert: Stop Ghana Water Privatization
Robert Weissman
rob@essential.org
Thu, 14 Mar 2002 15:17:06 -0800
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Forwarded from Sara Grusky, International Water Working Group, Public
Citizen; sgrusky@citizen.org.
ACTION ALERT ACTION ALERT ACTION ALERT ACTION ALERT
NEW IMF LOAN TO GHANA
INCLUDES CONDITIONS THAT WILL RAISE THE COST OF WATER
Ghana was awarded debt relief from the IMF and the World Bank last
week. What preceded this? Negotiations regarding the conditions that
will
be attached to the next tranche of Ghana's loan from the IMF. A newly
released IMF loan document, dated March 5, 2002, discusses the
conditions
imposed for the fourth and fifth tranche of Ghana's loan under the
IMF's
so-called Poverty Reduction and Growth Facility. The document states
that
IMF authorities will continue to require implementation of full cost
recovery(1) in the public utilities as a condition for releasing the
next
tranche of the loan. In addition, the IMF will continue to require that
the
Public Utility Regulatory
Commission develop an automatic tariff adjustment formula(2) for
electricity and water. (See definition of full cost recovery and
automatic
adjustment formula at bottom of alert)
(See the IMF document at:
http://www.imf.org/external/pubs/cat/longres.cfm?sk=15691.0)
IMF and World Bank loan conditions mandated a 95 percent price hike in
water fees in May 2001. The new IMF loan conditions mean that
additional price hikes will be planned. "The current water tariff rates
that the government of Ghana and the World Bank think are below the
market rate, are already beyond the means of most of the population in
Ghana," says Rudolf Amenga-Etego of the National Coalition Against
Privatisation of Water. "So, how will the population possibly be able
to absorb a so-called market price in the context of privatization?"
TAKE ACTION
Please send a fax o
r e-mail to the officials listed below urging them to
remove IMF and World Bank conditions requiring full cost recovery,
automatic tariff adjustments, and water privatization in Ghana. More
background information and sample letters are below. Water is essential
to
human life! Access to clean and affordable water is a human right! It
should not be treated as a common commodity or economic good to be
bought
and sold in the market place.
Please send a copy of your message to
Mr. Horst Kohler
Managing Director
International Monetary Fund
700 19th Street, N.W.
Washington, D.C. 20431
Email: hkohler@imf.org
Fax: (202) 623-4661
Mr. G.E. Gondwe
Director, African Department
International Monetary Fund
700 19th Street, N.W.
Washington, D.C. 20431 USA
Fax: 202 623-6587
Mr. Hugh Bredenkamp
West Africa Region
International Monetary Fund
700 19th Street, N.W.
Washington, D.C. 20431
Ema
il: hbredenkamp@imf.org
Fax: 202 623-4232
Mr. James Wolfensohn
President
The World Bank
1818 H Street, N.W.
Washington, D.C. 20433
Email: jwolfensohn@worldbank.org
Fax: 202 522-7700
Mr. Callisto Madavo
Africa Region Vice President
The World Bank
1818 H Street, N.W.
Washington, D.C. 20433 USA
Fax: 202 477-0380
Email: cmadavo@worldbank.org
Mr. Peter Harrold
Country Director for Ghana
The World Bank
P.O. Box M. 27
Accra, Ghana
Fax: (233-21) 227-887
Email: pharrold@worldbank.org
MORE BACKGROUND
For a number of years, World Bank and IMF policies have been pushing the
government of Ghana to increase consumer fees for water and lease the
water system to transnational water cor
porations. A broad cross-section
of Ghanaian civil society, including students, trade unions, nurses,
farmers and women's groups, many under the banner of the Ghana National
Coalition Against Privatisation of Water, oppose the proposed
privatization of the urban water system and the increased water fees.
The average price for a bucket of water, which used to be 400 cedis,
rose to 800 cedis following the May 2001 price hike. (One U.S. dollar
exchanges for 7,000 cedis.) Currently about 35 percent of the Ghanaian
population lacks access to safe water and 68 percent lack sanitation
services. More than 60 percent of the population earns less than US$1 a
day and approximately 40 percent fall below the national poverty line.
At the websites below you can find background information including:
1. A very detailed report and analysis by Christian Aid
2. Water is Life. A statement from the Ghana CAP of Water Campaign.
3. International Sign-On letters sent to the IMF and the World B
ank
regarding water privatization in Ghana
http://www.waterobservatory.org
http://www.citizen.org/cmep/Water/cmep_Water/
(1) Full cost recovery is the term used by the World Bank to mean
removing public subsidies for water and increasing consumer fees or
tariffs until they cover the full costs of operation and maintenance of
the water utility. Imposing "full cost recovery" commonly precedes
privatization in order to improve the financial standing of the company
prior to its sale.
(2) Automatic tariff adjustment formula in Ghana would require that
tariffs reflect shifts in the international exchange rate of the cedi.
In other words, consumer rates go up when the value of the cedi
depreciates in international markets. This is a common requirement of
multinational corporations who want to be shielded from the
effects of
shifts in soft currency exchange rates when they invest in developing
countries.
LETTER TO THE INTERNATIONAL MONETARY FUND
March 13, 2002
Mr. Horst Kohler
Managing Director
International Monetary Fund
700 19th Street, N.W.
Washington, D.C. 20431
Cc: Mr. G.E. Gondwe, Director, African Department
Mr. Hugh Bredenkamp, West Africa Region
Ms. Kathleen L. White, Public Affairs Division
Dear Mr. Kohler:
We thank Ms. Kathleen White of the External Relations Department for her
response to the international sign-on letter on water sector reform in
Ghana. However, it appears that neither yourself nor the members of the
African Department take the concerns of international civil society
organizations very seriously. The statements and concerns in our
letter, dated February 19, 2002, still stand. Nothin in Ms. White's
reply even begins to be persuasive enough to convince us otherwise.
Allow me to respond to her letter point by point.
First, on the f
undamental question of public debate and public
participation in key policy decisions such as the provision and
management of water services. Ms. White's reply states that "we would
endorse the principle that key policy choices should be subject to
public debate and participation, as you suggest."
Unfortunately, the twenty-year history of IMF structural adjustment
programs around the world belies this statement. Time and time again,
in country after country, key policy decisions have been made in
closed-door meetings between IMF officials and Finance Ministers without
the benefit of citizen participation. And, this is precisely what has
happened in Ghana. We are certain that you and the members of the
African Department are well aware of the fact that the last two tranches
of Ghana's IMF loan (the fourth tranche and the fifth tranche) from the
Poverty Reduction and Growth Facility include conditions related to
implementation of full cost recovery and automatic tariff adj
ustment
formulae for electricity and water. These, like many other key policy
decisions, have not been subject to broad-based citizen participation.
Second, Ms. White's reply states "we have, in fact, supported the
proposals drawn up by the independent Public Utilities Regulatory
Commission (PURC) to move to full cost recovery, and to adopt automatic
adjustment formulae to keep tariffs in line with the costs of water
provision."
Yes, the Ghana Public Utilities Regulatory Commission is a
constitutionally-mandated independent agency. Perhaps it should be
considered inappropriate for the IMF to use its leverage through loan
conditionalities to meddle in the internal affairs of an independent
agency. The IMF states that this pricing reform (full cost recovery and
automatic adjustment formulae) is "necessary to safeguard macroeconomic
stability." Does this mean that it is outside of the purview of the
PURC to make this decision? By stating that the PURC's implementation
of
full cost recovery and automatic adjustment mechanisms will be a
condition for completion of the fourth and fifth review of Ghana's IMF
loan, the IMF is again undercutting the possibility of a participatory
decision-making process. As a constitutionally mandated independent
agency, the PURC has the responsibility to be accountable to the
citizens of Ghana, not to the dictates of the IMF - even when the IMF
places substantial pressure on the independent agency, and the
government, through the imposition of loan conditions of this type.
Third, Ms. White states that "the PURC's plan was developed through
extensive consultation with civil society in Ghana..." As you are well
aware, the pressure toward water privatization and full cost recovery in
Ghana has generated some serious opposition within the country. A broad
cross-section of Ghanaian civil society, including women's groups,
teachers, trade unions, public health workers and students, have raised
concerns that full co
st recovery and automatic adjustment formulae could
have serious negative impacts on public health, women's work, and access
to clean and affordable water. While, as you say, consultations with
civil society have taken place, it would be an exaggeration to label
them "extensive." But, more importantly, it is clear that the
dissenting opinions voiced during those consultations have not swayed
the IMF's decision to require the PURC to implement full cost recovery
and automatic adjustment mechanisms. This is evidenced by the fact that
the same conditions have been imposed on the PURC in the fourth and
fifth tranche of the IMF loan.
In a country where 60 percent of the population earns less than US$1 a
day and more than two-thirds of the population earns less than US$2,
continued price hikes in the cost of water are not just an idle
concern. Access to clean water is a life and death matter. As you
might imagine, emotions run high on the matter. A regional coordinator
of the
Ghana National Coalition Against the Privatization of Water
stated recently in a letter to the World Bank that automatic tariff
adjustment formulae would be "...a deadly poison and a prescription for
death for the poor! How on earth can PURC be strengthened if you are
prescribing the formula for them."
On a final point, Ms. White states that, "the government indicates in
its latest letter of intent under Ghana's PRGF arrangement that it is
considering the provision of targeted subsidies to "buy down" water
rates for the poor." Universal access to water and sanitiation services
should be considered a basic human right. It should not be a charity
that can be doled out by governments as "targeted subsidies" to those
that fulfill the "needs-based assessment" of some administrative
bureaucracy. Rather than impose full cost recovery and automatic
adjustment mechanisms that will then require that the government "buy
down" water rates for the poor, perhaps there should be a
re
-consideration of the basic IMF and World Bank prescription. It
might even be cheaper to actually provide the funds to rehabilitate the
aging infrastructure of the Ghana Water Company, Ltd.
Regards,
Sara Grusky
U.S. Coordinator, International Water Working Group
Public Citizen, Water for All Campaign
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<html>
Forwarded from Sara Grusky, International Water Working Group, Public <br>
Citizen; <a href="mailto:sgrusky@citizen.org" class="moz-txt-link-abbreviated">sgrusky@citizen.org</a>.<br>
<br>
ACTION ALERT ACTION ALERT ACTION ALERT ACTION ALERT<br>
<br>
NEW IMF LOAN TO GHANA<br>
INCLUDES CONDITIONS THAT WILL RAISE THE COST OF WATER<br>
<br>
Ghana was awarded debt relief from the IMF and the World Bank last <br>
week. What preceded this? Negotiations regarding the conditions
that will <br>
be attached to the next tranche of Ghana's loan from the IMF. A newly <br>
released IMF loan document, dated March 5, 2002, discusses the conditions <br>
imposed for the fourth and fifth tranche of Ghana's loan under the IMF's <br>
so-called Poverty Reduction and Growth Facility. The document states
that <br>
IMF authorities will continue to require implementation of full cost <br>
recovery(1) in the public utilities as a condition for releasing the next <br>
tranche of the loan. In addition, the IMF will continue to require that<br>
the <br>
Public Utility Regulatory<br>
Commission develop an automatic tariff adjustment formula(2) for <br>
electricity and water. (See definition of full cost recovery and automatic <br>
adjustment formula at bottom of alert)<br>
(See the IMF document at:<br>
<a href="http://www.imf.org/external/pubs/cat/longres.cfm?sk=15691.0" class="moz-txt-link-freetext">http://www.imf.org/external/pubs/cat/longres.cfm?sk=15691.0</a>)<br>
<br>
IMF and World Bank loan conditions mandated a 95 percent price hike in<br>
water fees in May 2001. The new IMF loan conditions mean that<br>
additional price hikes will be planned. "The current water tariff
rates<br>
that the government of Ghana and the World Bank think are below the<br>
market rate, are already beyond the means of most of the population in<br>
Ghana," says Rudolf Amenga-Etego of the National Coalition Against<br>
Privatisation of Water. "So, how will the population possibly be
able<br>
to absorb a so-called market price in the context of privatization?"<br>
<br>
TAKE ACTION<br>
Please send a fax o<br>
r e-mail to the officials listed below urging them to<br>
remove IMF and World Bank conditions requiring full cost recovery,<br>
automatic tariff adjustments, and water privatization in Ghana. More <br>
background information and sample letters are below. Water is essential
to <br>
human life! Access to clean and affordable water is a human right!
It <br>
should not be treated as a common commodity or economic good to be bought <br>
and sold in the market place.<br>
<br>
Please send a copy of your message to <waterforall @igc.org=""><br>
<br>
Mr. Horst Kohler<br>
Managing Director<br>
International Monetary Fund<br>
700 19th Street, N.W.<br>
Washington, D.C. 20431<br>
Email: <a href="mailto:hkohler@imf.org" class="moz-txt-link-abbreviated">hkohler@imf.org<br>
</a>Fax: (202) 623-4661<br>
<br>
Mr. G.E. Gondwe<br>
Director, African Department<br>
International Monetary Fund<br>
700 19th Street, N.W.<br>
Washington, D.C. 20431 USA<br>
Fax: 202 623-6587<br>
<br>
Mr. Hugh Bredenkamp<br>
West Africa Region<br>
International Monetary Fund<br>
700 19th Street, N.W.<br>
Washington, D.C. 20431<br>
Ema<br>
il: <a href="mailto:hbredenkamp@imf.org" class="moz-txt-link-abbreviated">hbredenkamp@imf.org<br>
</a>Fax: 202 623-4232<br>
<br>
Mr. James Wolfensohn<br>
President<br>
The World Bank<br>
1818 H Street, N.W.<br>
Washington, D.C. 20433<br>
Email: <a href="mailto:jwolfensohn@worldbank.org" class="moz-txt-link-abbreviated">jwolfensohn@worldbank.org<br>
</a>Fax: 202 522-7700<br>
<br>
Mr. Callisto Madavo<br>
Africa Region Vice President<br>
The World Bank<br>
1818 H Street, N.W.<br>
Washington, D.C. 20433 USA<br>
Fax: 202 477-0380<br>
Email: <a href="mailto:cmadavo@worldbank.org" class="moz-txt-link-abbreviated">cmadavo@worldbank.org<br>
<br>
</a>Mr. Peter Harrold<br>
Country Director for Ghana<br>
The World Bank<br>
P.O. Box M. 27<br>
Accra, Ghana<br>
Fax: (233-21) 227-887<br>
Email: <a href="mailto:pharrold@worldbank.org" class="moz-txt-link-abbreviated">pharrold@worldbank.org<br>
<br>
</a>MORE BACKGROUND<br>
For a number of years, World Bank and IMF policies have been pushing the<br>
government of Ghana to increase consumer fees for water and lease the<br>
water system to transnational water cor<br>
porations. A broad cross-section<br>
of Ghanaian civil society, including students, trade unions, nurses,<br>
farmers and women's groups, many under the banner of the Ghana National<br>
Coalition Against Privatisation of Water, oppose the proposed<br>
privatization of the urban water system and the increased water fees.<br>
<br>
The average price for a bucket of water, which used to be 400 cedis,<br>
rose to 800 cedis following the May 2001 price hike. (One U.S. dollar<br>
exchanges for 7,000 cedis.) Currently about 35 percent of the Ghanaian<br>
population lacks access to safe water and 68 percent lack sanitation<br>
services. More than 60 percent of the population earns less than US$1 a<br>
day and approximately 40 percent fall below the national poverty line.<br>
<br>
At the websites below you can find background information including:<br>
1. A very detailed report and analysis by Christian Aid<br>
2. Water is Life. A statement from the Ghana CAP of Water Campaign.<br>
3. International Sign-On letters sent to the IMF and the World B<br>
ank<br>
regarding water privatization in Ghana<br>
<br>
<a href="http://www.waterobservatory.org" class="moz-txt-link-freetext">http://www.waterobservatory.org<br>
</a><a href="http://www.citizen.org/cmep/Water/cmep_Water/" class="moz-txt-link-freetext">http://www.citizen.org/cmep/Water/cmep_Water/<br>
<br>
</a> (1) Full cost recovery is the term used by the World Bank to
mean<br>
removing public subsidies for water and increasing consumer fees or<br>
tariffs until they cover the full costs of operation and maintenance of<br>
the water utility. Imposing "full cost recovery" commonly precedes<br>
privatization in order to improve the financial standing of the company<br>
prior to its sale.<br>
(2) Automatic tariff adjustment formula in Ghana would require that<br>
tariffs reflect shifts in the international exchange rate of the cedi.<br>
In other words, consumer rates go up when the value of the cedi<br>
depreciates in international markets. This is a common requirement
of<br>
multinational corporations who want to be shielded from the <br>
effects of<br>
shifts in soft currency exchange rates when they invest in developing<br>
countries.<br>
<br>
LETTER TO THE INTERNATIONAL MONETARY FUND<br>
<br>
March 13, 2002<br>
<br>
Mr. Horst Kohler<br>
Managing Director<br>
International Monetary Fund<br>
700 19th Street, N.W.<br>
Washington, D.C. 20431<br>
<br>
Cc: Mr. G.E. Gondwe, Director, African Department<br>
Mr. Hugh Bredenkamp, West
Africa Region<br>
Ms. Kathleen L. White,
Public Affairs Division<br>
<br>
Dear Mr. Kohler:<br>
<br>
We thank Ms. Kathleen White of the External Relations Department for her<br>
response to the international sign-on letter on water sector reform in<br>
Ghana. However, it appears that neither yourself nor the members
of the<br>
African Department take the concerns of international civil society<br>
organizations very seriously. The statements and concerns in our<br>
letter, dated February 19, 2002, still stand. Nothin in Ms. White's<br>
reply even begins to be persuasive enough to convince us otherwise.<br>
Allow me to respond to her letter point by point.<br>
<br>
First, on the f<br>
undamental question of public debate and public<br>
participation in key policy decisions such as the provision and<br>
management of water services. Ms. White's reply states that "we would<br>
endorse the principle that key policy choices should be subject to<br>
public debate and participation, as you suggest."<br>
<br>
Unfortunately, the twenty-year history of IMF structural adjustment<br>
programs around the world belies this statement. Time and time again,<br>
in country after country, key policy decisions have been made in<br>
closed-door meetings between IMF officials and Finance Ministers without<br>
the benefit of citizen participation. And, this is precisely what
has<br>
happened in Ghana. We are certain that you and the members of the<br>
African Department are well aware of the fact that the last two tranches<br>
of Ghana's IMF loan (the fourth tranche and the fifth tranche) from the<br>
Poverty Reduction and Growth Facility include conditions related to<br>
implementation of full cost recovery and automatic tariff adj<br>
ustment<br>
formulae for electricity and water. These, like many other key policy<br>
decisions, have not been subject to broad-based citizen participation.<br>
<br>
Second, Ms. White's reply states "we have, in fact, supported the<br>
proposals drawn up by the independent Public Utilities Regulatory<br>
Commission (PURC) to move to full cost recovery, and to adopt automatic<br>
adjustment formulae to keep tariffs in line with the costs of water<br>
provision."<br>
<br>
Yes, the Ghana Public Utilities Regulatory Commission is a<br>
constitutionally-mandated independent agency. Perhaps it should be<br>
considered inappropriate for the IMF to use its leverage through loan<br>
conditionalities to meddle in the internal affairs of an independent<br>
agency. The IMF states that this pricing reform (full cost recovery
and<br>
automatic adjustment formulae) is "necessary to safeguard macroeconomic<br>
stability." Does this mean that it is outside of the purview
of the<br>
PURC to make this decision? By stating that the PURC's implementation<br>
of<br>
full cost recovery and automatic adjustment mechanisms will be a<br>
condition for completion of the fourth and fifth review of Ghana's IMF<br>
loan, the IMF is again undercutting the possibility of a participatory<br>
decision-making process. As a constitutionally mandated independent<br>
agency, the PURC has the responsibility to be accountable to the<br>
citizens of Ghana, not to the dictates of the IMF - even when the IMF<br>
places substantial pressure on the independent agency, and the<br>
government, through the imposition of loan conditions of this type.<br>
<br>
Third, Ms. White states that "the PURC's plan was developed through<br>
extensive consultation with civil society in Ghana..." As you are
well<br>
aware, the pressure toward water privatization and full cost recovery in<br>
Ghana has generated some serious opposition within the country. A
broad<br>
cross-section of Ghanaian civil society, including women's groups,<br>
teachers, trade unions, public health workers and students, have raised<br>
concerns that full co<br>
st recovery and automatic adjustment formulae could<br>
have serious negative impacts on public health, women's work, and access<br>
to clean and affordable water. While, as you say, consultations with<br>
civil society have taken place, it would be an exaggeration to label<br>
them "extensive." But, more importantly, it is clear that the<br>
dissenting opinions voiced during those consultations have not swayed<br>
the IMF's decision to require the PURC to implement full cost recovery<br>
and automatic adjustment mechanisms. This is evidenced by the fact that<br>
the same conditions have been imposed on the PURC in the fourth and<br>
fifth tranche of the IMF loan.<br>
<br>
In a country where 60 percent of the population earns less than US$1 a<br>
day and more than two-thirds of the population earns less than US$2,<br>
continued price hikes in the cost of water are not just an idle<br>
concern. Access to clean water is a life and death matter.
As you<br>
might imagine, emotions run high on the matter. A regional coordinator<br>
of the<br>
Ghana National Coalition Against the Privatization of Water<br>
stated recently in a letter to the World Bank that automatic tariff<br>
adjustment formulae would be "...a deadly poison and a prescription for<br>
death for the poor! How on earth can PURC be strengthened if you
are<br>
prescribing the formula for them."<br>
<br>
On a final point, Ms. White states that, "the government indicates in<br>
its latest letter of intent under Ghana's PRGF arrangement that it is<br>
considering the provision of targeted subsidies to "buy down" water<br>
rates for the poor." Universal access to water and sanitiation services<br>
should be considered a basic human right. It should not be a charity<br>
that can be doled out by governments as "targeted subsidies" to those<br>
that fulfill the "needs-based assessment" of some administrative<br>
bureaucracy. Rather than impose full cost recovery and automatic<br>
adjustment mechanisms that will then require that the government "buy<br>
down" water rates for the poor, perhaps there should be a<br>
re<br>
-consideration of the basic IMF and World Bank prescription.
It<br>
might even be cheaper to actually provide the funds to rehabilitate the<br>
aging infrastructure of the Ghana Water Company, Ltd.<br>
<br>
Regards,<br>
<br>
Sara Grusky<br>
U.S. Coordinator, International Water Working Group<br>
Public Citizen, Water for All Campaign<br>
<br>
<BR></html>
--------------CE1504D1AF70EFDFE950BE68--