Nine months after the much-trumpeted announcement in London by the G8
Group composed of the most powerful countries of the planet: Canada, France, Germany, Italy, Japan, the UK and the USA, with Russia a full member since June 2002. Their heads of state meet annually, usually in June or July.
(eight most industrialised countries), the World Bank
WB The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.
It consists of several closely associated institutions, among which :
1. The International Bank for Reconstruction and Development (IBRD, 180 members in 1997), which provides loans in productive sectors such as farming or energy ;
2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;
3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.
As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.
http://worldbank.org has only just revealed its mode of cancelling the debt owed to it by some 17 heavily indebted poor countries Heavily Indebted Poor Countries
HIPC In 1996 the IMF and the World Bank launched an initiative aimed at reducing the debt burden for some 41 heavily indebted poor countries (HIPC), whose total debts amount to about 10% of the Third World Debt. The list includes 33 countries in Sub-Saharan Africa.
The idea at the back of the initiative is as follows: a country on the HIPC list can start an SAP programme of twice three years. At the end of the first stage (first three years) IMF experts assess the ’sustainability’ of the country’s debt (from medium term projections of the country’s balance of payments and of the net present value (NPV) of debt to exports ratio.
If the country’s debt is considered “unsustainable”, it is eligible for a second stage of reforms at the end of which its debt is made ’sustainable’ (that it it is given the financial means necessary to pay back the amounts due). Three years after the beginning of the initiative, only four countries had been deemed eligible for a very slight debt relief (Uganda, Bolivia, Burkina Faso, and Mozambique). Confronted with such poor results and with the Jubilee 2000 campaign (which brought in a petition with over 17 million signatures to the G7 meeting in Cologne in June 1999), the G7 (group of 7 most industrialised countries) and international financial institutions launched an enhanced initiative: “sustainability” criteria have been revised (for instance the value of the debt must only amount to 150% of export revenues instead of 200-250% as was the case before), the second stage in the reforms is not fixed any more: an assiduous pupil can anticipate and be granted debt relief earlier, and thirdly some interim relief can be granted after the first three years of reform.
Simultaneously the IMF and the World Bank change their vocabulary : their loans, which so far had been called, “enhanced structural adjustment facilities” (ESAF), are now called “Growth and Poverty Reduction Facilities” (GPRF) while “Structural Adjustment Policies” are now called “Poverty Reduction Strategy Paper”. This paper is drafted by the country requesting assistance with the help of the IMF and the World Bank and the participation of representatives from the civil society.
This enhanced initiative has been largely publicised: the international media announced a 90%, even a 100% cancellation after the Euro-African summit in Cairo (April 2000). Yet on closer examination the HIPC initiative turns out to be yet another delusive manoeuvre which suggests but in no way implements a cancellation of the debt.
List of the 42 Heavily Indebted Poor Countries: Angola, Benin, Bolivia, Burkina Faso, Burundi, Cameroon, Central African Republic, Chad, Comoro Islands, Congo, Ivory Coast, Democratic Republic of Congo, Ethiopia, Gambia, Ghana, Guinea, Guinea-Bissau, Guyana, Honduras, Kenya, Laos, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Myanmar, Nicaragua, Niger, Rwanda, Sao Tome and Principe, Senegal, Sierra Leone, Somalia, Sudan, Tanzania, Togo, Uganda, Vietnam, Zambia. (HIPC). The agreement, classified as “historic” by World Bank president Paul Wolfowitz, concerns 13 African countries and 4 in Latin America |1|. By July 2006 the debt owed by these countries to the World Bank is due to be written off. A total sum of 37 billion dollars has been announced, to be spread over 40 years.
Despite the proclamations of the World Bank, there is nothing new here. This decision merely consolidates - belatedly - the decision taken by the G8 last year. In addition, over the last ten years, the World Bank has spent only 2.6 billion dollars to reduce the debt of these 17 countries whereas it has a net worth of over 38 billion dollars. The financial effort is feeble to say the least, yet year after year it boasts a generosity that is totally unwarranted.
Launched in 1996, the HIPC initiative was meant to settle - once and for all - the problem of the debt of 42 very poor and heavily indebted countries. But the initiative has become a fiasco: the debt has gone from 218 to 205 billion dollars between 1996 and 2003, in other words it has been reduced by just 6% |2|. Although the majority of these countries have applied the drastic economic measures demanded by the IMF
International Monetary Fund Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.
When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.
As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).
The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.
http://imf.org and the World Bank, the burden of debt still hangs heavy on them. How, one asks, can there be trust towards those who have already failed and still persist in repeating their errors?
The CADTM affirms that for the World Bank, the debt is a very valuable instrument of domination. To achieve cancellation of the debt, the 17 countries concerned have had to fulfill all stages of the HIPC initiative and for at least 4 years submit to the rigors of the neo-liberal treadmill: drastic cutbacks in social spending, massive privatizations, opening up of markets, liberalization of the economy for the benefit of multinational corporations and international investors. All of these measures have taken a heavy toll in terms of poor people’s living conditions. All these countries have had to pay a high price, in terms of human suffering, for their eligibility to a doubtful privilege.
The CADTM takes the view that the World Bank’s decision is both ill-adapted and unacceptable. Ill-adapted, because it concerns a small number of countries (17, which together represent just 5% of the population of 165 so-called “developing” countries). Unacceptable, because it reinforces the dominance held by creditors over people worldwide through the intermediary of the debt. The World Bank “doctor” prescribes its poverty-reducing strategies (in fact, paltry sums sprinkled over a handful of social projects) while concealing the serious secondary effects: in countries where more than 40% of the budget goes to repayment of the debt, it prohibits governments from recruiting and training sufficient teachers, nursing staff, doctors, etc. in the name of untouchable principles such as the reduction of public posts and budget balancing.
This announcement leaves many questions unanswered: what cut-off date will be used to calculate the cancellation - end of 2004 as for the IMF or end 2003, as rumor has it, which would reduce the scope of the agreement? Will Mauritania - presently excluded from the list, be reintegrated? What about the many very poor countries forgotten by the HIPC initiative - such as Haiti, Eritrea or Nepal - which today are not eligible for any debt relief whatsoever? Will additional conditionalities be discreetly introduced by the World Bank to test the economic docility of a country?
The CADTM considers the World Bank procedure, and more generally the measures taken by all the creditors, as nothing more than a decoy designed to distract public opinion from the core problem. The essential demands remain the same: cancellation of the external public debt of all developing countries and an end to structural adjustment
Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.
Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors). policies. This debt siphons off the intrinsic wealth of countries in the South for the benefit of rich creditors, lays waste entire regions, spreads poverty and corruption. This debt is unlawful and largely odious. For the CADTM, total and unconditional cancellation of the debt is not negotiable.
Translated by Judith Harris.