'Bank for poor' under attack

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The Independent Online
A FEW months before its 50th anniversary the world's largest development aid agency, the World Bank, is facing such a sustained attack that its future may be in doubt.

The bank is under fire on three fronts - from Western governments (its chief shareholders), from charities and pressure groups monitoring its work, and from academic observers.

The World Bank has two arms. The International Bank for Reconstruction and Development (IBRD) makes loans to better-off developing countries at rates of interest close to commercial rates, while the International Development Association (IDA) lends at minimal rates to the poorest countries. An affiliate, the International Finance Corporation (IFC), invests in commercial enterprises.

Last week, at the IMF/World Bank spring meeting in Washington, the United States, Britain and France launched an unprecedented attack on the bank, demanding it place greater emphasis on markets. Kenneth Clarke, the Chancellor, pressed the bank to give the IFC a higher profile. He said: 'We must explore ways of expanding IFC activities without further early calls on shareholder resources.' This could suggest that Britain wants to expand the IFC by diverting money from Britain's aid for the poorest. In 1992/3 the Government gave the World Bank pounds 249.7m, more than 12.5 per cent of Britain's total aid budget; pounds 232m went to IDA, for poorer countries, and dollars 7.3m ( pounds 4.9) to the IFC.

But is IDA helping the poorest? Many pressure groups think not. They allege that IDA lending for structural adjustment programmes (Saps) and for controversial environmental schemes, is leaving millions of the poor worse off.

In Africa, 36 countries have implemented Saps on lines laid down by the bank. Under a typical Sap, a developing country goverment has to privatise its economy, devalue its currency, remove trade restrictions, cut subsidies and reduce spending on services such as health and education - or it does not receive any more aid. The medicine is intended to help economic growth. World Bank lending for Saps, as a proportion of its overall lending, has risen sharply, from 5.8 per cent in 1981 to around 25 per cent by the early 1990s.

The bank claims that structural adjustment is working in African countries that have implemented the right policies. It cites Ghana, Tanzania, The Gambia, Burkina Faso, Nigeria and Zimbabwe. But these claims are disputed.

In Nigeria the cuts have had a devastating effect on public health services. Christian Aid workers who talked to people in Zimbabwe found that the Sap was hurting many of the poor.

In a letter to Lewis Preston, World Bank President, African churches attacked Saps for their devastating impact and described bank policies as 'an assault on both the physical welfare and basic human dignity of the poor'.

Under the motto '50 years is enough' some pressure groups are arguing that the bank should be closed, others believe it should reform to be a genuine bank for the poor, but all agree 'that the bank as an institution should be a less powerful determinant of development', says Juliette Majot of BankCheck, a newsletter produced in California by International Rivers Network.

There is pressure on Western governments to reduce their contributions - Finland has already cut its contribution to IDA from dollars 47m to dollars 33m.

The third level of criticism faced by the World Bank is from academics who are serious bank watchers. At a seminar in London, organised by the Overseas Development Institute, (ODI), Paul Mosley, Professor of Economics at Reading University, said that previous bank evaluations had shown that non-adjusting countries in Africa were growing faster than adjusting countries. 'A lot of countries have done what the bank asked and are not growing,' he said.

Tony Killick, a former director of ODI, says that where reforms have been successful it is because African governments identify with the reforms. The World Bank has come under fire for imposing adjustment.

'There appears to have been a neglect of Africa's longer-term needs in formulating the policies,' says Frances Stewart of Queen Elizabeth House, Oxford, of Saps.