IMF, World Bank and Lending Institutions: Agents of Poverty or Development?
By Lord Aikins Adusei
Feature Article | Sat, 30 May 2009
Feature Article | Sat, 30 May 2009
 IN SOME PARTS OF THE WORLD black IS STILL A WRONG COLOUR. WE STILL HAVE A LONG WAY TO GO, WE MIGHT HAVE CHANGED THE BOOKS, BUT WE STILL HAVE TO CHANGE THE MINDS OF SOME PEOPLE. - By: FRANCIS TAWIAH , Duisburg - Germany  More Quotes | Submit a Quote |
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According to The World Bank, it is, “a vital source of financial and technical assistance to developing countries around the world. We are not a bank in the common sense. We are made up of two unique development institutions owned by 184 member countries—the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). Each institution plays a different but supportive role in our mission of global poverty reduction and the improvement of living standards. The IBRD focuses on middle income and creditworthy poor countries, while IDA focuses on the poorest countries in the world. Together we provide low-interest loans, interest-free credit and grants to developing countries for education, health, infrastructure, communications and many other purposes."
The above statement of claim taken from the World Bank website contains half truth. Yes it is true that in theory the World Bank would like to reduce global poverty but in practice it is the opposite. The fact still remains that both the Bank and the IMF have done very little to help the world´s poor rather their condition has been worsened by the past and present behaviour of the Banks. There is little evidence to back the claim of both institutions that they are a vital source of financial and technical assistance to developing countries. The World Bank may be a vital source of financial assistance to the corrupt regimes in these poor countries and not to the poor. There is no evidence to suggest that the poor people from third world countries have benefited from loans given to their governments. At best what the Bank and IMF have helped the poor countries to do is to build up massive debts that they may never be able to pay.
Third World countries including the whole of Africa have incurred trillions of dollars in debts through loans contracted from the Bank, IMF and Western governments which the people who now wallow in utter poverty, never benefited. Most of these conditional loans were either stolen or used to service debts already owned by these poor countries. Part of the loans were also used to pay foreign expatriates supplied to the poor countries by IMF, World Bank as ´technical experts´ but whose contribution is the result of poverty seen in the third world. Again the loans were used to prop up corrupt regimes who diverted the funds to their private bank accounts in Switzerland, France, Britain, Liechtenstein and Luxembourg and Austria among others.
In 2006 for example, developing countries owed $3.7-trillion in odious debt, servicing more than $570-billion per annum. An analysis by economist James Henry revealed that more than $1-trillion worth of loans "disappeared into corruption-ridden projects or was simply stolen outright". Out of this debt Africa owes $200 billion and uses $14 billion annually to service it, money that could be used to provide education, healthcare other basic needs for the people. The over $200 billion that African countries owe to foreign creditors represents a crippling load that undermines economic and social progress. The all Africa Churches Conference says this debt and its servicing represent "a new form of slavery, as vicious as the slave trade".
The servicing of such massive debts has brought untold and worsening economic hardships to the poor as third world governments have been forced to freeze investments in education, health, transport, agriculture, housing, sanitation and other vital infrastructures. Evidence of this hardship are chronic poverty, malnutrition, diseases, starvation, hunger, decaying and inadequate infrastructures and economic failures seen everywhere in the developing world. The sad aspect of these debts servicing is that the current generation who are paying for it never requested it nor benefited from it in anyway. The debts were incurred at a time when these countries did not even need loans yet World Bank, IMF and Western governments encouraged them to go for it.
Africa Action a Not for Profit Organisation says, "The albatross of illegitimate debt diverts money directly from spending on health care, education and other important needs. While most people in Africa live on less than $2 per day, African countries are forced to spend almost $14 billion each year servicing old, illegitimate debts to rich country governments and their institutions, the World Bank and the International Monetary Fund (IMF). Over the past two decades, African countries have paid out more in debt service to foreign creditors than they have received in development assistance or in new loans. Much of Africa's foreign debt is illegitimate in nature, having been incurred by unrepresentative and despotic regimes, mainly during the era of Cold War patronage. Loans were made to corrupt leaders who used the money for their own personal gain, often with the full knowledge and support of lenders. These loans did not benefit Africa's people. More
generally, many Africans question the notion of an African "debt" to the U.S. and European countries after centuries of exploitation. They ask, "Who really owes whom?"Yet, despite the social and economic costs of this massive outflow of resources from the world's poorest region, the wealthy creditors of Africa's debts continue to insist these debts be repaid." Source http://www.africaaction.org /campaign_new /debt.php
Joseph Hanlon of Jubilee Research UK gives details to what happened to monies loaned to Mobutu of former Zaire now DR.Congo. He says: "Much of poor country debt is related to the Cold War, when both sides pushed money at their supporters. Zaire's ruler, Mobutu Sese Seko, was one of the world's most corrupt leaders and it was for his government that the word kleptocracy was first coined. Mobutu became one of the world's richest men, with a personal fortune estimated at more than $10 billion owning palaces in Europe and Zaire. But the West saw Mobutu as a loyal ally in the Cold War (in part for his support of the US, in its backing for UNITA in Angola). In 1978 the IMF appointed their own man, Edwin Blumenthal, to a key post in Zaire´s central bank. He resigned two years later, complaining of "sordid and pernicious corruption" that was so serious that "there is no chance, I repeat no chance, that Zaire's numerous creditors will ever recover their loans."
And look what happened after this report.
Shortly after Blumenthal's report to the IMF, it gave Zaire the largest ever loan given to an African country. When Blumenthal wrote his report, Zaire's debt was $5 billion; by the time Mobutu was overthrown and died in 1998, the debt was over $13 billion. In the six years after Blumenthal's report, the IMF lent Zaire $600 million and the World Bank $650 million. In those six years Western governments lent Mobutu nearly $3 billion.
About 50% of the $13-billion was stolen and deposited in Western Banks notably Switzerland and France while the rest was wasted on white elephant projects that never solved the poverty problem in the country. Today majority of Congolese live on less than a dollar a day while hundreds of millions of dollars are paid to the IMF and World Bank every year as fees for loans taken and stolen by Mobutu.
In another classic example, the World Bank lent Indonesia a total of US$30 billion in the course of General Suharto's three decades of rule. In 1998, World Bank resident staff in Indonesia estimated that: "at least 20-30 per cent of GOI [Government of Indonesia] development budget funds are diverted through informal payments to GOI staff and politicians, and there is no basis to claim a smaller 'leakage' for Bank projects as our controls have little practical effect on the methods generally used". That means by the Bank's own account that up to US$9 billion of World Bank loans to Indonesia were wasted through corruption and that World Bank staff knew it. And they did absolutely nothing to stop the corruption. Today the poor people of Indonesia are still paying for the billions of dollars wasted before the eyes of IMF.
In Philippines during the regime of the dictator Ferdinand Marcos, the Bank and IMF were absolutely aware of the fact that most loans to Philippines were transferred into the bank accounts of Ferdinand Marcos and his generals; nevertheless they considered it as a necessary bribe for paying the political staff in power in order to ensure the acceleration of the neoliberal counter reform. As a result World Bank lent Marcos $400m in 1980; $251m in 1982 and $600m in 1983 and Marcos deposited the money in his accounts in Switzerland. So far the Philipinos are still paying for the policies of the Bank and IMF.
Dr. Susan Hawley author of Exporting Corruption has written extensively about how loans taken and diverted into private banks by Ferdinand Marcos have gruesomely affected Philippines´ development and her quest to reduce poverty. She says: "The US company, Westinghouse won a contract in the early 1970s to build the Bataan nuclear plant in the Philippines. It was alleged that Westinghouse gave President Ferdinand Marcos US$80 million in kickbacks. The plant cost $2.3 billion three times the price of a comparable plant built by the same company in Korea. Filipino taxpayers have spent $1.2 billion servicing the plant's debts even though the plant has never produced a single watt of electricity because it was built at the foot of a volcano near several earthquake faultlines. The Philippine government is still paying $170,000 a day in interest on the loans taken out to finance the nuclear plant and will continue to do so up to the year 2018. A Philippino
Treasurer Leonor Briones recently commented on the loans: "It is a terrible burden which never fails to elicit feelings of rage, anger and frustration in me. We're talking of money that should have gone to basic services like schools and hospitals". Source: Dr. Susan Hawley.
Patricia Adams, executive director of Probe International, in her book Odious Debts estimates the Philippino dictator, Ferdinand Marcos, and his wife Imelda, pocketed literally one-third of the Philippines' entire borrowing – much of it in the form of kickbacks and commissions on aid and loan-funded projects. His personal wealth when he was overthrown was $10 billion. Source: Jubileeresearch.org.
The behaviour of the two Banks and other lending institutions to prop up corrupt regimes explains why after 50 years of loans there has not been any appreciable reduction in poverty levels world wide and especially in Africa. As I said the best the two Bretton Woods institutions have done is to help the poor countries to build massive debts and increase poverty. Today majority of the 945 million Africans (70%) live on less than two dollars a day meanwhile hundreds of billions of dollars have been loaned to their corrupt leaders and there is nothing to show for it.
James Wolfensohn, Ex-World Bank President seems to disagree and says: "As a public institution we are accountable for helping our borrowers to see that the money allocated under Bank-financed operations is being spent on what it should be spent on and that our borrowers are getting good value for what is being spent". But how does Wolfensohn reconcile his statement with reports regarding loans to dictators in Africa, Asia and South America that produced nothing but poverty? The question is has the billions of loans and aid to third world countries change anything for the poor people in those countries? Can Wolfensohn say with empirical evidence that countries that have borrowed money from the Bank got value for the money? I do not think so. There is no evidence to suggest that IMF and World Bank even made the effort to ensure the people benefited from the loans and there is no evidence to prove that both institutions made effort to recover the money from
Mobutu, Suharto, Marcos, or the Banks in Switzerland after it became obvious the dictators had stashed the money in foreign Banks. The two mega banks did not make any effort because they knew future generations cannot afford to refuse to pay as that will be a stain on their credit worthiness. But how fair is it to ask people to pay for things they or their country never benefited?
Instead of being agents of growth, development and helping to fight poverty, what the two institutions and their western political masters have done so far is to entrench poverty, diseases, hunger, starvation and malnutrition in these poor voiceless countries. The pressure on the poor countries to meet their debt obligations has forced many of them to use scarce resources to service these debts to the detriment of their economies and their peoples. If indeed the Bank and the IMF are committed to reducing poverty why would they loan money to corrupt regimes or refuse to take responsibility for the failures of their own policies and actions? Why would they help poor countries to build massive debts only to wash their hands off the debt? And why should poor Africans, Asians and Latinos be made to pay the odious and illegitimate loans that they never benefited? Why should poor African and third world countries be made to take responsibility for the failures
of IMF and the Bank´s ill conceived policies that have brought misery and untold hardships to the poor? Who should take responsibility for these odious and illegitimate debts is it the Bank who loaned out of negligence and without due diligence or the people who never benefited? Continued
Source: Lord Aikins Adusei
The above statement of claim taken from the World Bank website contains half truth. Yes it is true that in theory the World Bank would like to reduce global poverty but in practice it is the opposite. The fact still remains that both the Bank and the IMF have done very little to help the world´s poor rather their condition has been worsened by the past and present behaviour of the Banks. There is little evidence to back the claim of both institutions that they are a vital source of financial and technical assistance to developing countries. The World Bank may be a vital source of financial assistance to the corrupt regimes in these poor countries and not to the poor. There is no evidence to suggest that the poor people from third world countries have benefited from loans given to their governments. At best what the Bank and IMF have helped the poor countries to do is to build up massive debts that they may never be able to pay.
Third World countries including the whole of Africa have incurred trillions of dollars in debts through loans contracted from the Bank, IMF and Western governments which the people who now wallow in utter poverty, never benefited. Most of these conditional loans were either stolen or used to service debts already owned by these poor countries. Part of the loans were also used to pay foreign expatriates supplied to the poor countries by IMF, World Bank as ´technical experts´ but whose contribution is the result of poverty seen in the third world. Again the loans were used to prop up corrupt regimes who diverted the funds to their private bank accounts in Switzerland, France, Britain, Liechtenstein and Luxembourg and Austria among others.
In 2006 for example, developing countries owed $3.7-trillion in odious debt, servicing more than $570-billion per annum. An analysis by economist James Henry revealed that more than $1-trillion worth of loans "disappeared into corruption-ridden projects or was simply stolen outright". Out of this debt Africa owes $200 billion and uses $14 billion annually to service it, money that could be used to provide education, healthcare other basic needs for the people. The over $200 billion that African countries owe to foreign creditors represents a crippling load that undermines economic and social progress. The all Africa Churches Conference says this debt and its servicing represent "a new form of slavery, as vicious as the slave trade".
The servicing of such massive debts has brought untold and worsening economic hardships to the poor as third world governments have been forced to freeze investments in education, health, transport, agriculture, housing, sanitation and other vital infrastructures. Evidence of this hardship are chronic poverty, malnutrition, diseases, starvation, hunger, decaying and inadequate infrastructures and economic failures seen everywhere in the developing world. The sad aspect of these debts servicing is that the current generation who are paying for it never requested it nor benefited from it in anyway. The debts were incurred at a time when these countries did not even need loans yet World Bank, IMF and Western governments encouraged them to go for it.
Africa Action a Not for Profit Organisation says, "The albatross of illegitimate debt diverts money directly from spending on health care, education and other important needs. While most people in Africa live on less than $2 per day, African countries are forced to spend almost $14 billion each year servicing old, illegitimate debts to rich country governments and their institutions, the World Bank and the International Monetary Fund (IMF). Over the past two decades, African countries have paid out more in debt service to foreign creditors than they have received in development assistance or in new loans. Much of Africa's foreign debt is illegitimate in nature, having been incurred by unrepresentative and despotic regimes, mainly during the era of Cold War patronage. Loans were made to corrupt leaders who used the money for their own personal gain, often with the full knowledge and support of lenders. These loans did not benefit Africa's people. More
generally, many Africans question the notion of an African "debt" to the U.S. and European countries after centuries of exploitation. They ask, "Who really owes whom?"Yet, despite the social and economic costs of this massive outflow of resources from the world's poorest region, the wealthy creditors of Africa's debts continue to insist these debts be repaid." Source http://www.africaaction.org /campaign_new /debt.php
Joseph Hanlon of Jubilee Research UK gives details to what happened to monies loaned to Mobutu of former Zaire now DR.Congo. He says: "Much of poor country debt is related to the Cold War, when both sides pushed money at their supporters. Zaire's ruler, Mobutu Sese Seko, was one of the world's most corrupt leaders and it was for his government that the word kleptocracy was first coined. Mobutu became one of the world's richest men, with a personal fortune estimated at more than $10 billion owning palaces in Europe and Zaire. But the West saw Mobutu as a loyal ally in the Cold War (in part for his support of the US, in its backing for UNITA in Angola). In 1978 the IMF appointed their own man, Edwin Blumenthal, to a key post in Zaire´s central bank. He resigned two years later, complaining of "sordid and pernicious corruption" that was so serious that "there is no chance, I repeat no chance, that Zaire's numerous creditors will ever recover their loans."
And look what happened after this report.
Shortly after Blumenthal's report to the IMF, it gave Zaire the largest ever loan given to an African country. When Blumenthal wrote his report, Zaire's debt was $5 billion; by the time Mobutu was overthrown and died in 1998, the debt was over $13 billion. In the six years after Blumenthal's report, the IMF lent Zaire $600 million and the World Bank $650 million. In those six years Western governments lent Mobutu nearly $3 billion.
About 50% of the $13-billion was stolen and deposited in Western Banks notably Switzerland and France while the rest was wasted on white elephant projects that never solved the poverty problem in the country. Today majority of Congolese live on less than a dollar a day while hundreds of millions of dollars are paid to the IMF and World Bank every year as fees for loans taken and stolen by Mobutu.
In another classic example, the World Bank lent Indonesia a total of US$30 billion in the course of General Suharto's three decades of rule. In 1998, World Bank resident staff in Indonesia estimated that: "at least 20-30 per cent of GOI [Government of Indonesia] development budget funds are diverted through informal payments to GOI staff and politicians, and there is no basis to claim a smaller 'leakage' for Bank projects as our controls have little practical effect on the methods generally used". That means by the Bank's own account that up to US$9 billion of World Bank loans to Indonesia were wasted through corruption and that World Bank staff knew it. And they did absolutely nothing to stop the corruption. Today the poor people of Indonesia are still paying for the billions of dollars wasted before the eyes of IMF.
In Philippines during the regime of the dictator Ferdinand Marcos, the Bank and IMF were absolutely aware of the fact that most loans to Philippines were transferred into the bank accounts of Ferdinand Marcos and his generals; nevertheless they considered it as a necessary bribe for paying the political staff in power in order to ensure the acceleration of the neoliberal counter reform. As a result World Bank lent Marcos $400m in 1980; $251m in 1982 and $600m in 1983 and Marcos deposited the money in his accounts in Switzerland. So far the Philipinos are still paying for the policies of the Bank and IMF.
Dr. Susan Hawley author of Exporting Corruption has written extensively about how loans taken and diverted into private banks by Ferdinand Marcos have gruesomely affected Philippines´ development and her quest to reduce poverty. She says: "The US company, Westinghouse won a contract in the early 1970s to build the Bataan nuclear plant in the Philippines. It was alleged that Westinghouse gave President Ferdinand Marcos US$80 million in kickbacks. The plant cost $2.3 billion three times the price of a comparable plant built by the same company in Korea. Filipino taxpayers have spent $1.2 billion servicing the plant's debts even though the plant has never produced a single watt of electricity because it was built at the foot of a volcano near several earthquake faultlines. The Philippine government is still paying $170,000 a day in interest on the loans taken out to finance the nuclear plant and will continue to do so up to the year 2018. A Philippino
Treasurer Leonor Briones recently commented on the loans: "It is a terrible burden which never fails to elicit feelings of rage, anger and frustration in me. We're talking of money that should have gone to basic services like schools and hospitals". Source: Dr. Susan Hawley.
Patricia Adams, executive director of Probe International, in her book Odious Debts estimates the Philippino dictator, Ferdinand Marcos, and his wife Imelda, pocketed literally one-third of the Philippines' entire borrowing – much of it in the form of kickbacks and commissions on aid and loan-funded projects. His personal wealth when he was overthrown was $10 billion. Source: Jubileeresearch.org.
The behaviour of the two Banks and other lending institutions to prop up corrupt regimes explains why after 50 years of loans there has not been any appreciable reduction in poverty levels world wide and especially in Africa. As I said the best the two Bretton Woods institutions have done is to help the poor countries to build massive debts and increase poverty. Today majority of the 945 million Africans (70%) live on less than two dollars a day meanwhile hundreds of billions of dollars have been loaned to their corrupt leaders and there is nothing to show for it.
James Wolfensohn, Ex-World Bank President seems to disagree and says: "As a public institution we are accountable for helping our borrowers to see that the money allocated under Bank-financed operations is being spent on what it should be spent on and that our borrowers are getting good value for what is being spent". But how does Wolfensohn reconcile his statement with reports regarding loans to dictators in Africa, Asia and South America that produced nothing but poverty? The question is has the billions of loans and aid to third world countries change anything for the poor people in those countries? Can Wolfensohn say with empirical evidence that countries that have borrowed money from the Bank got value for the money? I do not think so. There is no evidence to suggest that IMF and World Bank even made the effort to ensure the people benefited from the loans and there is no evidence to prove that both institutions made effort to recover the money from
Mobutu, Suharto, Marcos, or the Banks in Switzerland after it became obvious the dictators had stashed the money in foreign Banks. The two mega banks did not make any effort because they knew future generations cannot afford to refuse to pay as that will be a stain on their credit worthiness. But how fair is it to ask people to pay for things they or their country never benefited?
Instead of being agents of growth, development and helping to fight poverty, what the two institutions and their western political masters have done so far is to entrench poverty, diseases, hunger, starvation and malnutrition in these poor voiceless countries. The pressure on the poor countries to meet their debt obligations has forced many of them to use scarce resources to service these debts to the detriment of their economies and their peoples. If indeed the Bank and the IMF are committed to reducing poverty why would they loan money to corrupt regimes or refuse to take responsibility for the failures of their own policies and actions? Why would they help poor countries to build massive debts only to wash their hands off the debt? And why should poor Africans, Asians and Latinos be made to pay the odious and illegitimate loans that they never benefited? Why should poor African and third world countries be made to take responsibility for the failures
of IMF and the Bank´s ill conceived policies that have brought misery and untold hardships to the poor? Who should take responsibility for these odious and illegitimate debts is it the Bank who loaned out of negligence and without due diligence or the people who never benefited? Continued
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World Bank corruption
Peter Bossarde | Accra-Ghana (Sweden) | 6/14/2009 8:20:00 PM
Despite promises from former World Bank President James Wolfensohn back in 1996 to take vigorous action to combat bribery, a new book by bank insider Steve Berkman suggests that nothing has changed, writes Peter Bossard. Citing case studies from Nigeria and Gambia, Bossard says Berkman's The World Bank and the Gods of Lending 'combines number crunching with vivid detail and moral outrage'. Berkman concludes that not one of the more than 100 projects he worked on 'did not reek of corruption', says Bossard, estimating that depending on the country, 15-40 per cent of the World Bank's disbursements for any given project are lost to corruption. But Berkman 'does not give up all hope', arguing that the World Bank 'needs to spend less and supervise more' and proposing that 'the bank fully disclose all anti-corruption investigations, government agencies involved and funds stolen in its annual report'
