World Bank, IMF Ripping Africa’s Coffers

By Sam Ditshego

The World Bank and International Monetary Fund (IMF) are playing a shameful role in their relation with Africa and other developing countries. These international agencies are dipping into Africa’s coffers damaging her natural environment, leaving the continent environmentally degraded and the people poor, hungry, unhealthy, ignorant and grossly underdeveloped.

The economic and political structures of most African countries are shaped by IMF and the World Bank. These institutions make granting of loans conditional on policy changes by borrowing governments. The debtor countries have huge interest rates imposed on them by these money lenders. When these countries are unable to pay past loans because interest rates are exorbitant, the World Bank and IMF, under the threat of denying them future credit, have imposed drastic austerity measures at alarming human cost.

“…the World Bank had deliberately and consciously used its financial power to promote the interests of private, international capital in its expansion to every corner of the “underdeveloped’ world. It has worked toward this end in many different ways:

  1. By acting as intermediary for the flow of funds abroad, with taxpayers’ money from its developed member countries serving to guarantee the safety of the bond it sells;
  2. By opening up previously remote regions through transportation and telecommunications investments, thus destroying the natural protection each region had previously enjoyed;
  3. By indirectly aiding certain multinational corporations, notably, but not exclusively, in the mining sector;
  4. By pressing the borrowing governments to improve the legal privileges for the tax liabilities of foreign investment.
  5. By insisting on production for export, which chiefly benefits the corporations that control international trade;
  6. By selectively refusing to loan to governments that repudiate international debts or nationalise foreign property;
  7. By opposing minimum wage laws, trade activity, and all kinds of measures that would impose the share of labour in the national income;
  8. By insisting on procurement through international competitive bidding which favours the largest multinationals;
  9. By opposing all kinds of locally owned businesses and industry; and
  10. By financing projects and promoting national policies that deny control of basic resources – land, water, forests – to poor people and appropriate them for the benefit of multinationals and their collaborative local elites.” (Cheryl Payer).

The Selebi-Phikwe project in Botswana experienced an industrial action by miners in 1975. The strike was severely repressed by the government and the mining companies acting in concert. (The repression of Marikana miners’ strike in 2012 is part of the modus operandi of World Bank and IMF client states).

Point seven above is fully upheld by World Bank recipient countries including Botswana (and South Africa). That [it} is clear that African countries represent the interests of the World Bank and IMF instead of the electorate.

In Indonesia, Brazil, Cambodia, Argentina and some African countries the military seized power from elected governments of popular rulers. Within a few weeks of the coup, a mission from the International Monetary Fund arrives in each country to advise the new rulers on the reorganisation of their economy.

It should be noted that in Nigeria there was an attempt to topple former President Ibrahim Babangida after he defied the IMF.

In 1982 more than one hundred IMF loan agreements were put in place in the developing countries.

Structural adjustment facilities, new projects to realign economies through the joint efforts of the IMF and the World Bank had by 1988 entrapped almost 30 of the world’s poorest countries, the majority in Africa. Under the guise of giving aid, an IMF-World Bank condominium has been imposed over much of Sub-Saharan Africa.

In 1986 and 1987 the net transfer of resources from sub-Saharan Africa to the IMF was close to $1 Billion. IN 1988 the developing countries exported $43 Billion to the developed nations.

When former British Deputy Prime Minister Sir Geoffrey Howe visited Lagos in September 1985, in his capacity then as Foreign Secretary, he was adamant that Britain would not agree to the rescheduling of Nigeria’s debts until the new government in Lagos had reached an agreement with the IMF.

In 1987 Uganda sought help from the IMF. As a reward for devaluing its currency and agreeing to abide by IMF prices on imports and exports, the IMF offered Uganda credit of more than $40 Million, with another $32 Million over the next years.

Zambia and the IMF agreed on an outline of economic reforms after Zambia broke off relations with the Fund in 1987. The IMF agreed to new loans only after Zambia had cleared its arrears of $890 Million to the Fund and $460 Million to the World Bank.

In its loan operations in Africa in recent years, the thrust of the World Bank’s structural adjustment programmes has been to reduce the role of the state in the economy in favour of the private sector.

The World Bank’s relationship with the African governments is more pervasive and intrusive.

The IMF is concerned with regulating currency adjustments and fiscal as well as monetary policy. Because of the resources it controls and its power to interfere in the internal affairs of borrowing nations, the IMF is more powerful than the United Nations Organisation.

The World Bank and IMF frequently operate in the same countries. A country that has foreign exchange shortage or needs to reschedule its debts will be required by its foreign aid donors and its debtors to negotiate an agreement with the IMF before more aid can be considered or before its debts can be rescheduled.

These financial institutions exercise considerable leverage on African governments desperate for foreign exchange by making their efforts to financing from other sources conditional on reforms.

Africa is experiencing economic stagnation. The standard of living of the African people continues to fall. Meanwhile the wealth of the continent benefits people of the industrialised western countries.

In Zaire (DRC) eight out of ten people live in absolute poverty; real wages are a tenth of what they were in 1960 and in some places half the(number of) children die before they reach the age of five. In 1988 the country’s external debt was $5 Billion, which by some accounts is the same amount that President Mobutu Sese Seko and his family had accumulated outside the country.

Between 1985 and 1987 Nigeria’s per capita income was more than halved, from $800 to $380. Kenya was under IMF supervision. An official from the IMF was hidden in the country’s central bank in Nairobi where he could make all crucial decisions. Between 1975 and 1984 the minimum wage declined by 42 percent. A government survey in 1982 found that 28 percent of the children were stunted as a result of poor nutrition. Nearly half the children surveyed had been sick within the previous two weeks.

In the overcrowded maternity hospitals in many African countries mothers and their babies die torturous deaths for lack of the most necessary medical supplies and trained personnel as a result of the IMF and World Bank imposed “belt tightening”.

Due to World Bank and IMF austerity measures the health system and the educational institutions which already were fragile due to insufficient funding are collapsing.

The World Bank has financed environmentally and socially questionable development projects in developing countries.

In Botswana, the World Bank funded a million dollar scheme to expand production of beef for export. Botswana is already overgrazed and further (overgrazing) causes soil erosion and desertification.

The fencing used to pen in cattle is disrupting the migration patterns of herds of wild animals, which are dying of thirst because ranchers drive them away from water sources needed for domestic livestock.

Apart from environmental can of worms, Botswana has grave socio-economic problems – rising unemployment, urbanisation and many other social ills.

The military destabilisation activities of South Africa were financed by overseas borrowing. Because of the size of its borrowing, South Africa received unusually favourable treatment in debt rescheduling exercise and in 1982 it received an IMF credit on particularly easy terms.

In contrast with loans to the Frontline states and elsewhere, at the time, the Fund did not require South Africa to abolish imperfections in the labour market or reduce drastically its state spending. These requirements would have been inconsistent with the maintenance of apartheid and with the enormous expenditures on domestic repression and war with the neighbouring Frontline states.

In 1976 after the Soweto student uprising and massacre, the IMF gave South Africa loans totalling $464 Million.

*This article was published in Botswana’s weekly newspaper The Gazette of 8 November 1989 under the headline, “World Bank, IMF ripping Africa’s coffers?”

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