Who'd be a son of a bitch banker?

James Wolfensohn expected acclaim, but found himself attacked. Kevin Watkins explains why
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The Independent Online
James Wolfensohn is an aggrieved man. The president of the World Bank feels that the new initiative to resolve the debt problems of poor countries has attracted unfair criticism. "I expected a standing ovation," he told a press conference last week. "Instead I'm being treated as a son of a bitch."

His reaction is wrong-headed and counter-productive. As finance ministers gather in Washington today for the spring meeting of the IMF-World Bank, Mr Wolfensohn should aim his fire at the IMF and those countries that are systematically seeking to delay and minimise debt relief for the poor.

He could start with some blunt talking to the US Treasury Secretary, Robert Rubin. Earlier this month, Mr Rubin unveiled a major initiative to support social and economic recovery in Africa. Increased investment in health and education was identified as a priority. A few days after the announcement, the US supported German and Japanese demands to delay, for two years, debt relief for Uganda, the first country to qualify under the initiative. Thanks to the combined efforts of the World Bank and the British Government, the delay was reduced to one year. Even so, this will cost Uganda around $190m - money it had pledged for more than doubling the budget for primary education in a country where 2.5 million children are not in school.

In a bizarre effort to explain his policy paradox, the US says it wants to use debt relief as a lever for promoting economic reform. Yet both Uganda and Bolivia, which must also wait another year for debt reduction, have exemplary records in economic reform, having carried out IMF-World Bank programmes for around 12 years. Other countries, such as Mozambique, Ethiopia, Tanzania and Zambia, all chronically indebted and impoverished, will not begin to be eligible until after 2000.

Worse than that, the conditions that the bank and the fund demand have a lamentable record on the ground, undermining investment and growth. IMF "stabilisation" has become a euphemism for the collapse of basic health and education systems. Debtors are required virtually to enter a social and economic suicide pact with the IMF. Such demands should be abandoned.

Whatever the intentions of the US in seeking to delay debt relief, it is playing into the hands of those opposed to the debt relief plan, notably the finance ministries of Germany and Japan (countries that have benefited from generous debt relief in the post-war period). For its part, the IMF has developed foot-dragging and obstruction on debt relief into an institutional art form, first denying the existence of a debt problem, and now using its technical influence to understate the scale of debt relief required.

Set against this formidable political coalition, Mr Wolfensohn has allies in Britain, the Scandinavian countries, The Netherlands and Australia. More important, he has an ally in international public opinion, which is increasingly disgusted with the failure of governments to resolve the debt crisis, and is increasingly aware of the human costs of debt.

Yet moral questions and the human face of the debt crisis are conspicuous by their absence from arcane disputes about finance. So, too, is any consideration of the human costs of a failure to reduce the burden of debt on poor countries. In Mozambique, 200,000 children will die this year as a result of infectious diseases that could be prevented through low-cost primary health intervention; less than half the country's children are in primary school. Meanwhile, the government of Mozambique is spending twice as much repaying external creditors as it is spending on health and education combined.

The story is dismally similar elsewhere. According to a recent study by Oxfam International, eight highly indebted countries in Africa are spending more on debt repayments than it would cost to reduce child mortality to the targets set at the 1990 World Summit for Children. Without that debt, 3 million young lives could be saved. That is why Oxfam International has called for debt relief to be integrated into a broader international plan for reducing poverty.

Recently, Mr Wolfensohn outlined his strategic vision for transforming the World Bank into a dynamic force for poverty reduction. If he is to deliver, he cannot afford to fail on debt.

The writer is senior policy adviser at Oxfam.

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