fred2265:

IMF is motivated by corporate American interests only, and have no interest in what is best for African (and other) nations.

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[b]The World Bank and IMF in Africa
A little History
The World Bank and IMF in Africa
August 2008

The World Bank and International Monetary Fund (IMF) are two of the most powerful international financial institutions in the world. They are the major sources of lending to African countries, and use the loans they provide as leverage to prescribe policies and dictate major changes in the economies of these countries. The World Bank is the largest public development institution in the world, lending over $24 billion in 2007 – of which over $5 billion (or 22 percent) went to Africa.

The World Bank and IMF are controlled by the world’s richest countries, particularly the U.S., which is the main shareholder in both institutions. The World Bank, headquartered in Washington, DC, follows a “one dollar, one vote” system whereby members with the greatest financial contributions have the greatest say in decision making. The U.S. holds roughly 17% of the vote in the World Bank and the 48 sub-Saharan African countries together have less than 9% of the votes. The Group of 7 rich countries (G-7) control 45% of World Bank votes. This system ensures that the World Bank and IMF act in the interest of the rich countries, promoting a model of economic growth (called neo-liberal) that benefits the richest countries and the international private sector.

Over the past two decades, the poorest countries in the world have had to turn increasingly to the World Bank and IMF for financial assistance, because their impoverishment has made it impossible for them to borrow elsewhere. The World Bank and IMF attach strict conditions to their loans, which give them great control over borrower governments. On average, low-income countries are subject to as many as 67 conditions per World Bank loan. African countries, in need of new loans, have had no choice but to accept these conditions.

The World Bank and IMF have forced African countries to adopt “structural adjustment programs” (SAP) and other measures which cut back government spending on basic services. They have required African governments to reduce trade barriers and open their markets, maintaining their economies as sources of cheap raw materials and cheap labor for multinational corporations.

As a result of World Bank and IMF policies, average incomes in Africa have declined, and the continent’s poverty has increased. Africa’s debt crisis has worsened over the past two decades, as the failure of World Bank and IMF intervention has left African countries more dependent than ever on new loans. These institutions have also undermined Africa’s health through the policies they have imposed. Forced cutbacks in spending on health care, and the privatization of basic services, have left Africa’s people more vulnerable to HIV/AIDS and other poverty-related diseases.

http://rainbowwarrior2005./2008/11/07/the-world-bank-and-imf-in-africa/
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[b]Again and again in Southern Africa and across the Third World the IMF’s free-market economic advice and conditions on loans have been disastrous. These disasters have led to a profound crisis of legitimacy for the Washington institution. Former World Bank chief economist Joseph Stiglitz wrote in the April 2000 New Republic magazine that the IMF is populated by “third-rate economists.”

One reason for the IMF’s crisis of legitimacy is the control exercised by the US government. This power is based on ownership of 18% of the IMF’s shares, enough to veto anything the US disagrees with.

The IMF remains a profoundly undemocratic institution, whose economic policies have been roundly condemned for the misery caused throughout the Third World and especially in East Asia, Russia and Latin America when “emerging market crises” occurred during 1997-99.

The IMF’s fraternal institution, the World Bank, has had an especially obnoxious role in Johannesburg. Bank staff were responsible for a 1995 infrastructure policy which recommended low standards and high prices for household water and electricity, even though the Reconstruction and Development Programme mandated the opposite. Bank staff recommended that low-income households be not given flush toilets but instead use pit-latrines, without considering the public health risks of excrement leaking into Johannesburg’s water table through its dolomitic rock.

When a similar scheme was established in Winterveld in 1991, hundreds of people got cholera as a result.

The Bank also promoted privatisation of municipal services across the country. In Johannesburg, it took the lead on research to promote a one-sided, pro-corporate perspective on iGoli 2002. It is no wonder that the Johannesburg privatisation plan has been renamed “E.Coli 2002″.

For all these reasons, the visit of Horst Koehler and the ongoing role played by the World Bank in Johannesburg represent very serious dangers to poor and working-class people and the environment.
http://rainbowwarrior2005./2008/11/07/the-world-bank-and-imf-in-africa/

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[b]How The IMF-World Bank and Structural Adjustment Program Destroyed Africa
World Tuesday, September 7th, 2010
Africa Poverty Structural adjustment programmes (SAPs) have been implemented in many ‘developing’ countries since the 1980s. They were designed by the International Monetary Fund and the World Bank imposed as a condition for further loans. Below is a brief background of the events that led many countries to accept SAPs. It describes how SAPs are being implemented and what results they have produced over the past 20 years. This article also gives a short analysis of the roles of the World Bank, the IMF and the local political elites in this process.

Structural Adjustment and the Debt Crisis

SAPs were born as a result of a debt crisis that has hit especially developing countries since the 1980s.

This debt crisis has its origin in the early 1970s when oil-producing countries that had united in the Organisation of Petroleum Exporting Countries (OPEC) increased the oil price to gain additional revenue. Most of these profits were invested with banks in industrialised countries. These banks, in turn, were interested to lend this money to developing countries to finance the purchase of products from the industrialised countries. In this way, the loans given to ‘developing’ countries helped to stimulate production in the North (see Toussaint and Comanne 1995: 15). At that time. both private and public institutions encouraged the South to borrow. Even the World Bank ‘preached the doctrine of debt as the path towards accelerated development’. As a result, huge amounts were borrowed by the political elites, often wasted on luxuries, ‘white elephant’ projects or stolen by corrupt officials (Usually stooges, selected by the exiting colonial powers to lead these failed African states). Very little was invested productively with a view of achieving sustainable economic growth (see George 1995: 21).

During the 1970s loans were given freely at very low interest rates but this situation changed dramatically in the early 1980s. The USA pushed up interest rates drastically in an attempt to stop inflation. ‘Developing’ countries that had taken out loans with US banks now had to pay huge interests. The major lending banks in Europe followed suit and the debt crisis was born (see George 1995: 21). ‘Developing’ countries were unable to repay their loans and were forced to take up new loans to pay the interest.

In 1980 the total debt of developing countries stood at US$ 567 billion. Between 1980 and 1992 these countries paid back US$ 1662 billion. However, because of the high interest rates, the debt increased to US$ 1419 billion in 1992 – despite the repayments! The rising interest rates forced developing countries to take out new loans to avoid bankruptcy.

Debt repayments drain about US$ 160 billion each year from ‘developing’ countries. This is about 2.5 times the total development aid that these countries receive!

Since the 1980s, debt repayments are a major mechanism of transferring wealth from the South to the North. The former French President Francois Mitterand admitted this when he said in 1994:

‘Despite the considerable sums spent on bilateral and multilateral aid, the flow of capital from Africa toward the industrial countries is greater than the flow of capital from the industrial countries to the developing countries’ (see Touissaint and Comanne 1995: 10-12).

Despite the fact that ‘developing’ countries have long paid back their initial loans, they are still highly indebted and are dependent on new loans. This paved the way for the IMF and World Bank to come ‘to the rescue’. They were given the task to make sure that ‘developing’ countries will continue paying their debt by offering new loans – to countries who accept certain conditions: structural adjustment.

The role of the IMF and World Bank

Initially the idea behind the World Bank and IMF, also called the Bretton Woods institutions, was widely supported. The Bank was given the task to rebuild first Europe and then other countries after the Second World War. The IMF was supposed to facilitate trade and to make short-term loans available to countries with temporary balance of payment problems (see George 1995: 19).

Today the IMF and the World Bank are much more powerful than its founders could have imagined. Both have over 170 member countries whose power is determined by the amount they pay in subscriptions. This system of ‘one dollar – one vote’ has meant that the rich industrialised countries control these institutions today (see the description of the IMF and World Bank attached). The IMF and World Bank are far from democratic and their policies are shaped by their principal shareholders – the powerful industrialised countries.

The IMF and World Bank today have a strong influence over economic policies in many countries. The inability of many countries to repay their debt has made them dependent on new loans. The IMF has the power to declare countries credit worthy – or not. To get the seal of approval countries have to accept the conditions of structural adjustment programmes. They have to restructure their economies according to IMF/World Bank guidelines – otherwise they will have virtually no chance to get loans from private or public creditors anywhere (see George 1995:19-21).

The Implementation of Structural Adjustment Programmes

SAPs are built on the fundamental condition that debtor countries have to repay their debt in hard currency. This <!–[if !vml]–><!–[endif]–>leads to a policy of ‘exports at all costs’ because exports are the only way for ‘developing’ countries to obtain such currencies.

A first feature of SAPs is therefore a switch in production from what local people eat, wear or use towards goods that can be sold in the industrialised countries. Since the 1980s dozens of countries have followed these policies simultaneously. They often exported the same primary commodities, competed with each other and then suffered because of declining world market prices for their commodities. Between 1980 and 1992, ‘developing’ countries lost 52% of their export income due to deteriorating prices (see Touissant and Comanne 1995: 12; George 1995:22; Bournay 1995: 51).

SAPs have 4 fundamental objectives according to which they are shaped:

Liberalisation: promoting the free movement of capital; opening of national markets to international competition.

Privatisation of public services and companies.

De-regulations of labour relations and cutting social safety nets.

Improving competitiveness (see Toissant and Comanne 1995:14)

Based on these objectives, SAPs prescribe nearly always the same measures as a condition for new loans. These are:

reduction of government deficit through cuts in public spending (cost recovery programmes);

higher interest rates

liberalisation of foreign exchange rules and trade (deregulation);

rationalisation and privatisation of public and parastatal companies;

deregulation of the economy, for example:

- liberalisation of foreign investment regulations

- deregulation of the labour market, e.g. wage ‘flexibility’

- abolishing price controls and food subsidies

shift from import substitution to export production (see Isaacs 1997: 135)

These measures forced countries on a path of deregulated free market economies. The IMF/World bank basically determine countries’ macro-economic policies, they take control over central bank policies and over public expenditure through the so-called ‘Public Expenditure Review’. SAPs promote the principal of cost-recovery for social services and the gradual withdrawal of the state from basic health and educational services. Under its ‘Public Investment Programme’ the IMF even decides what type of infrastructure should be built while an imposed system of international tender ensures that public-works projects are carried out by international construction and engineering firms (see Chossudovsky 1995: 59).

Although several countries were skeptical about such neo-liberal policies (designed along the ideas of the Reagan and Thatcher administrations) they were forced to abandon socialist or even social democratic ideas. In this way, the debt crisis has provided the IMF and World Bank with a very effective instrument of disciplining rebellious countries. Debtor countries are kept in a ‘strait-jacket’ which prevents them from implementing their own economic policies (SEE George 1995:21; Chossudovsky 1995:57).

The Results of Structural Adjustment Programmes

Despite the IMF and World Bank claims of SAP successes, it is widely acknowledged that SAPs have failed to achieve their goals. They have not created wealth and economic development as unregulated markets did not benefit the poor and failed to protect the delivery of social services. The IMF/World Bank believe that the elimination of protective tariffs will make domestic industries more competitive. In reality, domestic manufacturing often collapsed and imported consumer goods replaced domestic production. Other results of SAPs were:

Privatisation allows international capital to buy state enterprises at very low costs.

Tax reforms under SAPs (like VAT) place a greater tax burden on middle and low-income groups while foreign capital receives generous tax holidays.

Deregulation of the banking system leads to very high interest rates which makes most goods unaffordable to the majority.

Elimination of subsidies and prize controls, covered with devaluation lead to price increases and reduce real earnings in the formal and informal sectors.

Free movement of foreign exchange allows foreign companies to repatriate their profits. It also allows the ‘laundering’ of ‘dirty money’ from offshore banking accounts.

Cost-recovery programmes in the health sector increased the inequality in health care delivery, reduced health coverage and increased the number of people without access to health care. Diseases like cholera, malaria and yellow fever are on the increase again.

Various NGOs funded by international aid agencies have gradually taken over government functions in the social sector.

Cuts in public sector employment (for example 300 000 civil servants were retrenched in Zaire – now DRC – in 1995), coupled with bankruptcies of local companies has led to large increases in unemployment.

Liberalisation of the labour market leads to the elimination of cost of living adjustment clauses in collective agreements and to the phasing out of minimum wage legislation.

Export orientation in agriculture is eliminating subsistence crops and accelerates the exodus of the unemployed towards the cities. (See Touissant and Comanne 1995: 9; Chossudovsky 1995:58-64)

Even in those countries that are singled out as success stories, SAPs imposed severe hardships on the poor. In Uganda, for example, the government obediently followed the World Bank/IMF policies and implemented far-reaching liberalisation such as:

Privatisation of government institutions

Reducing the size of the civil service and the army

Liberalisation of foreign exchange

Decentralisation of services to local authorities

Cuts in government spending on social services

Despite some (statistical) economic growth, these policies resulted in:

Drop in formal sector employment to less than 14% of the economically active population

Retrenchment of more than half the civil service (170 000)

Lack of equipment and medication in government health facilities

Collapse of small enterprises

Declining co-operative movement

Trade Unions lost 60% of their members since 1990

SAPs had a detrimental effect on social services. In the education sector, for example, they led to:

Increasing class size (student-teacher ratios)

Increasing school fees as part of cost-recovery programmes

Reduction in the number of teachers and/or wage freezes

Introduction of ‘double shifts’

Drop in the standard of public education due to deteriorating facilities

Increase in private schools for the wealthy

Increasing inequalities in the standard of education between poor and rich communities

Lower enrolment at schools as the poor have to choose between feeding their children and paying for school uniforms, stationery and school fees.

Finance-driven education reforms under SAPs often reversed the gains made by African countries after independence.

SAPs meant that most countries had to make major cuts in their education budgets and the world-wide rate of illiteracy began to grow again after a long period of decline (see Bournay 1995: 51). The poor and vulnerable groups in society are always the hardest hit by the SAP measures. SAPs have had a particularly negative effect on women because:

Privatisation of social services like health and education makes these services unaffordable for the poor. As a result, women are often forced to take on these responsibilities, for example tacking care of the sick.

Cuts in education services lead to an increase in illiteracy among women and girls. Under SAPs, the drop-out rate for girls is increasing.

Reduced spending on health leads to an increase in maternal deaths.

The elimination of food subsidies coupled with falling (real) wages reduces women’s buying power.

Unemployment is increasing as a result of public sector ‘restructuring’

‘Labour flexibility’ may result in more jobs for women at the expense of men. These jobs, however, are usually poorly paid and insecure.

The reduction of formal sector jobs drives women into the informal sector.

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efisher:

Can somebody tell me how fuel subsidy removal benefits IMF or USA.

sleek29:

IMF can use a $1 debt to enslave a country, Nigeria is rich, Nigeria's development would make it a China for west African countries, the emergence of China caused America's economic woes.

Think about this I lend you money & ask you to pay an amount back(amortisation), I gave you the money telling you exactly what to do with it, I want to further keep you enslaved by giving you policies that'll ensure you are forever dependent on me, keep servicing loans with more money that you spend on key arears of the economy.
The World Bank would soon loan this govt huge amounts & this subsidy monies would be used in servicing it
@aribisala0, Nigeria does owe, do not be deceived, have you seen the budget proposal?

aribisala0:

let us assume it is IMF policy so what?
We once paid 20 kobo for petrol and it is now 65 naira. the skies have not fallen.
There really is no justification for subsidies. True there is a lot of corruption and government is unjustifiably large and those issues need to be dealt with  but they should not be conflated with subsidies.

Subsidies create a false sense of reality and encourages waste. People should pay the market value of what they use and the building of private refineries encouraged.
Nigeria DID NOT sign up to removing subsidies with anyone. The bulk of Nigeria's debt burden is owed to Nigerians NOT the IMF.
Nigeria is a member of the IMF like the UK, US and Greece and the IMF does give "advice" to these countries too. Also if they lend money to a country they are Well within their rights to attach conditions so that they get their money back which is normal. That is NOT the case right now anyhow. We must remember that Nigeria is one of the countries that contributes to the fund and they too,like others,expect the Fund to manage their money wisely.
Do we really need the IMF to tell us that it is foolish and unsustainable to subsidise petrol so that we sell it 3 times less than our neighbours.
w e may argue that it should be phased in gradually and that exchange rate should be stabilised  but it is just storing up problems for the future if we don't deal with it now. We may also argue that rather than diverting money from states to the sovereign wealth fund the oil subsidy should be used for that