[stop-imf] IMF and WB role in African famine - Guardian

[Robert Weissman]

Guardian Newspapers Limited
The Guardian (London)
November 30, 2002
Guardian Special Supplement, Pg. 2

HEADLINE: Famine in Africa: Unelected and unaccountable: The
International Monetary Fund
and the World Bank have assumed the role of assisting the poorer
nations, but now their policies
are being criticised for being unhelpful and out of date

BYLINE: Charlotte Denny

BODY:
    Pick up a copy of the local newspaper in most African capital cities
and you could be forgiven
for thinking that the International Monetary Fund was a branch of
government. Fund staff issue
warnings that public sector pay claims are unaffordable, admonish
ministers over their failure to
cut trade barriers and advise central banks to keep a strict rein on
inflation. Meanwhile the World
Bank instructs cash-strapped local health ministries to introduce
hospital fees despite the fact that
African households simply cannot afford to pay for their treatments. For
a westerner, it is almost
unimaginable that a foreign bureaucrat would dare to instruct an elected
politician on how to run
the economy. The last western economy forced to submit to the Fund's
strictures was Britain,
more than a quarter of a century ago.

    The reason why two institutions wield so much power in Africa is
simple: money.
Cash-strapped African governments have no choice but to go cap in hand
to the Washington duo
because few commercial banks would risk lending to them. With the loans
come a cat's cradle of
conditions on how to run their economies.

    The close watch the two cast over Africa today would probably
surprise John Meynard
Keynes, one of the leading lights at the Bretton Woods conference where
the two institutions
were born in the dying days of the second world war. Their original
tasks were nothing to do with
Africa: the Bank was set up to help reconstruct the shattered economies
of war-torn Europe while
the Fund's job was to help countries facing balance-of-payments crises.
With the breakdown of
the fixed exchange rates in the early 1970s and the development of
Europe, the twins' original role
became gradually redundant. But by then, they had turned their attention
to other regions, notably
Africa.

    Confusingly, their names should probably be reversed. The Fund acts
more like a bank: lending
at concessional rates to support countries facing balance-of-payments
troubles. Because it is more
concerned about short-term economic management issues, its loans come
with conditions about
things like controlling inflation and budget deficits. Without a Fund
programme other donors
won't consider helping a country, giving it an even more crucial
gatekeeper role.


    The Bank is really a development fund. It lends for long-term
investment projects at even more
concessional rates than the fund; for the poorest countries, its loans
are practically free. The
strings it attaches deal with longer-term structural issues such as
privatisation, regulation and
trade tariffs.

    Today the Bank and Fund's sweeping remits give them enormous powers
over the day-to-day
running of the average African country. But the voting structure of the
two institutions reflects
their post-war role rather than today's reality: western governments who
foot the bills control the
votes. While the United Nations is based on one country one vote, in the
Bank and the Fund, it is
more like one dollar one vote, and the US has enough votes to have an
effective veto.

    "They are rather like latter-day proconsuls with huge influence
across the region," says Duncan
Green of the Catholic Agency for Overseas Development. "The problem is
that along with that
comes a circa-1980s view of economics."

    Their critics charge that the Bretton Woods twins prescribe a
simplistic recipe of privatisation,
deregulation and liberalisation to vulnerable economies which has
resulted in many African
countries being poorer today than they were 30 years ago. "Economic
thinking has moved on in
the countries that run the Bank and the Fund, but the two are still
pedalling the same old snake oil
to developing countries," says Green.

    "In the last two decades Africa's least developed countries have
seen their share of world trade
fall from 0.6% to 0.3%," says Concern's chief executive Tom Arnold. "We
deny them the means
to earn a living and condemn them to the welfare of aid."

    Telling governments with no money to cut their spending programmes
may make sense from
the point of view of keeping the budget deficit under control, but it is
a disaster for social
programmes. Health and education ministries have been forced to
introduce fees which
cash-strapped African households can't afford.

    The Bank has reversed its policy on user fees in education, after it
caused a disastrous fall off in
school enrolment rates, but it continues to advocate "cost-sharing" in
health. The Fund's big
failing according to Kevin Watkins of Oxfam is that it gives economic
policy advice without any
regard for how this will affect their ability to reach internationally
agreed goals for poverty
reduction. "They continue to set fiscal targets which are inconsistent
with millennium
development targets," he says.

    A recent paper by Oxfam argues that while the immediate cause for
the crisis is a succession of
poor harvests caused by bad weather, the region has been made more
vulnerable to food
shortages by the advice doled out by donors in the early 1990s.
Mozambique, Zambia and Malawi
all undertook radical reform of their agriculture sectors, abandoning
state controls and moving to
a system of minimal intervention. The state marketing boards that,
although riddled with
corruption, provided a vital source of support and advice to farmers,
were abolished. In previous
famines, these boards prevented the prices of staple crops like maize
from spiralling and imported
supplies to fill the gaps. Now price controls have been removed, prices
are highest when the poor
can least afford to pay them.


    Under fire from aid agencies, anti-globalisation protestors, and a
few more enlightened donor
governments, the two organisations argue that they are changing their
ways. The Bank now
champions a new approach to dealing with client countries which, it
argues, puts them in the
driver's seat. Countries prepare poverty reduction strategy programmes
(PRSPs) in consultation
with local interest groups, advised by the Bank and the Fund. The
buzz-word is "country
ownership" but opinions differ as to how much difference PRSPs really
have made. Like good
exam candidates, when they prepare their PRSPs, countries know what the
IMF and the Bank
want to see. The big macro-economic decisions are still made by finance
ministries rather than
social spending ministries. Finance ministries in most African
governments are staffed by officials
who hold very similar views to Bank and Fund staff.

    Further, while there is an increasing openness to debate in the
headquarters of the two
institutions, out in the field there is less evidence of change.