IMF and World Bank: Out
of control

How Congress can reform two bad institutions

By Russell Mokhiber and Robert Weissman

THE INTERNATIONAL MONETARY Fund and World Bank are institutions out of control. For evidence, consider the institutions' feeble and fatally flawed debt-relief program. Under the Highly Indebted Poor Country initiative, the world's poorest countries can receive a reduction of approximately one third of their current payments to overseas creditors – if they endure six years of closely monitored, extremely intrusive "structural adjustment."

Structural adjustment is the policy package that includes such measures as indiscriminate privatization, labor-market deregulation, government-spending cuts, trade and financial liberalization, economic deregulation, an emphasis on exports, and charges ("user fees") for people to attend clinics for basic health care.

HIPC is the institutions' most important fig leaf, a program designed to obscure the view of the harm they are doing to poor countries. The World Bank and IMF regularly tout HIPC as a sign of their responsiveness to the poor.

But now the HIPC initiative is beginning to collapse, even on its own terms. In April, during their spring meetings, the IMF and Bank announced that several of the countries that have qualified for debt relief by suffering through the first three years of mandated structural adjustment are about to lose their debt-relief eligibility. The charge: they have failed to implement structural-adjustment conditions with sufficient vigor.

Apparently, the World Bank and IMF can't control themselves. They want to exact more blood from the world's poorest countries, even when they must know it will sabotage their public relations campaign.

There is, however, now an opportunity to rein in the World Bank and IMF. This year the World Bank is seeking new monies for its International Development Association, the arm of the bank that lends to the poorest countries. Getting the U.S. contribution to IDA will require a vote by the U.S. Congress.

A broad coalition of U.S. environmental, development, religious, labor, and global justice organizations has formed to demand that if the United States decides to contribute to IDA – a near certainty – then it also work for policies to reduce the power of the IMF and World Bank. (Essential Action is part of this coalition.)

The coalition is drawing on a successful initiative of the year 2000, when Congress enacted a law requiring the U.S. representatives to the World Bank and IMF to vote against projects or loans that included user fees for primary education or health care.

The Treasury Department, which manages U.S. policy at the World Bank and IMF, invented a duplicitous reading of the legislative language to avoid carrying out congressional intent, especially on health care user fees.

But the passage of the law helped force a reconsideration of education user fees. Now the World Bank, which for 15 years has encouraged school fees, is actively working to help countries remove such charges. In Tanzania the recent elimination of school fees enabled 1.5 million children who otherwise would have been locked out to go to school.

The coalition is now urging the United States to oppose loans or projects that include a range of harmful provisions, including restrictions on labor rights, increased water charges for the poor, environmentally hazardous practices such as aggressive pesticide use, and privatization without safeguards for workers; and protections against corruption and privatization of tobacco enterprises. (For details on the proposals, see .)

The coalition is also proposing that IDA appropriation be accompanied by new U.S. support for debt cancellation for the poorest countries. Along with social and environmental assessments of structural adjustment – conducted before such policies are put into place – and requirements that the World Bank measure the effectiveness of its project loans.

Some set of these proposals will appear in an IDA authorization bill, which will be considered by the House Financial Services Committee and the Senate Foreign Relations Committee over the summer, as well as in the foreign operations appropriations bill, which is sure to pass by the end of the congressional term.

It is sad and pathetic that these reforms, limiting the ability of the World Bank and IMF to do harm, must come from the U.S. Congress. Sad, because institutions that claim to be devoted to eradicating poverty should not need such external discipline. Pathetic, because it is not people in affected countries who have the ability to influence the institutions' policies, but uniquely the citizens of the United States.