Relief at last from World Bank and IMF

The two international lenders are finally helping their poorest debtors. Michael Prest reports
Click to follow
The Independent Online
There is a deep symbolism about the World Bank and the International Monetary Fund, the dissimilar twins of international financial orthodoxy, holding their annual beano in Hong Kong. The "Asian miracle" both institutions proclaimed has inconveniently faltered recently and the World Bank, at least, needs a miracle of its own.

An ambitious and not always delicate attempt by the Bank's tempestuous president, Jim Wolfensohn, to shake up the bureaucracy has so far caused much pain and produced little gain. Both institutions are under heavy fire from groups such as Oxfam and Christian Aid for offering too little, too late by way of debt relief to the world's poorest countries.

Beyond that, they are still struggling to find and explain clear roles for themselves in a world transformed by plentiful footloose capital, the end of the Cold War, and disillusion with the capacity of international organisations to make the world a better place.

Despite being relatively unaffected by the destabilising ripples that spread out from Thailand's continuing financial crises, China is distinguished by its human rights abuses, intellectual piracy, rampant corruption, and lack of political - as distinct from economic - democracy. Nowhere is more aware of the dark underside of China's remarkable economic growth than Hong Kong.

In many ways, these issues put the Bank on the spot - and there were misgivings when the Chinese deliberately invited the Bank and the Fund to Hong Kong for 1997. The two institutions were founded in 1944, partly at the instigation of John Maynard (Lord) Keynes, as pillars of a new post-war economic order. The Bank was to supply capital to countries that could not borrow easily, and the Fund was to prevent balance of payments crises.

All the Bank's borrowers are developing countries, and the very poorest, such as the Africans, virtually depend on the Bank for survival. The Fund is also busy pushing through policy changes it believes are necessary to restore poor countries' economic health. But infighting between the two institutions contributed towards the delay in deciding on a Highly Indebted Poor Countries Initiative (HIPC), which would include relief for previously sacrosanct Bank and Fund loans.

Last week, however, the Bank and Fund boards formally approved debt relief worth a total of $900m (pounds 560m) for Bolivia, Burkina Faso, and Uganda. More is in the offing for Guyana, Ivory Coast and Mozambique. It is envisaged that 19 countries will receive relief worth about $8bn over a decade.

The Bank will have to find around $1.8bn and the Fund $800m. But as Mr Wolfensohn has tartly pointed out, the success of the initiative now depends on the willingness of Gordon Brown, Chancellor of the Exchequer, and his rich country colleagues to stump up money to finance relief on their loans to developing countries. Mr Brown has pledged that Britain will write off debt owed to it by Commonwealth members.

By persuading the Bank and Fund to set a moral example over debt relief, Mr Wolfensohn has achieved what no predecessor managed. But critics contrast the speed of the Bank and Fund's $17.2bn bailout for relatively wealthy Thailand (of which $1.5bn was from the Bank) with the foot-dragging negotiations over debt relief for countries whose people earn barely a dollar a day.

Michel Camdessus, the IMF's managing director, and Mr Wolfensohn have declared their frustration at Thailand's slowness in tackling its problems, although they have also closed ranks and bravely proclaimed that the region's miracle will continue. It seems that the Bank and Fund are meeting in the right place at the right time for unexpected reasons.

Copyright: IOS & Bloomberg

Comments