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Leading industrial nations are putting pressure on the International Monetary Fund (IMF) and World Bank to reform. The two global financial institutions became, after more than half a century, rigid bureaucracies and they need to modernise their strategies and tools to be able to achieve the agreed goals by member states in a rapidly changing world.
As the world is driven towards more globalisation, the role of the institutions is increasingly demanded as vehicles for pushing developing countries towards liberalising their econ-omies to integrate into the global market-oriented economy. The reform required by developed countries is meant to strengthen the role of the Fund and the Bank in such a direction.
These recommendations for change can be summarised as follows:
- Transform structural adjustment policies, with special emphasis on addressing the risks to poor people inherent in liberalisation of trade, financial and investment regimes and privatisation measures;
- Conduct impact assessments. Impact assessments could provide an "early warning system" to ensure that loan operations (or country-wide strategies) with potentially adverse social and environmental consequences are changed or discontinued;
- Adopt sound operational policies to guide the design and implementation of IMF and World Bank operations. Compliance with sound operational policies is a key to achieving desired social and environmental results.
- Disclose secret documents. When the terms and conditions for IMF and World Bank engagement in a country are kept secret, popular participation is impeded and the quality of loan operations is jeopardised.
This is in addition to streamlining a reform process within the institutions themselves to cut their bureaucratic volumes.
But for billions of people in Third World countries, this is not going to change the perceived image of the two institutions as a tool of economic imperialism.
| TOWARDS CHANGE |
| Recommendations |
| - Transform structural adjustment policies, with special emphasis on addressing the risks to poor people inherent in liberalisation of trade, financial and investment regimes and privatisation measures; |
| Conduct impact assessments. Impact assessments could provide an "early warning system to ensure that loan operations (or country-wide strategies) with potentially adverse social and environmental consequences are changed or discontinued; |
| - Adopt sound operational policies to guide the design and implementation of IMF and World Bank operations. Compliance with sound operational policies is a key to achieving desired social and environmental results. |
| - Disclose secret documents. When the terms and conditions for IMF and World Bank engagement in a country are kept secret, popular participation is impeded and the quality of loan operations is jeopardised. |
SAP requirements
Some SAP requirements include:
Removal of tariffs that help small local industries to survive against global corporations.
- Removal of domestic rules that may slow down or regulate foreign investment, thus enabling global financiers.
- Elimination of price controls - even on necessities like food or water - and in addition, the imposition of wage controls. The predictable outcome has been that already underpaid workers become even less able to survive.
-Drastic reductions in social services and the agencies that run them. Often, these services become privatised so that the help that people once received for free now requires fees to global corporations. Many people cannot afford fees, and are dropped out of the system.
-Aggressive destruction of Popular Programmes by which nations attempt to achieve self-reliance in basics such as food, transport, basic industry, and basic resources.
-Rapid forced conversion of domestic economics to emphasise export production, usually under absentee management by foreign investors and global corporations.
The theory here is that when countries concentrate their production on a few products for export, they will gain increased foreign exchange. This enables them to purchase their needs in foreign markets.
This formula is, in practice, a complete failure. With ever increasing urgency, many civil society groups began calling upon the institutions to transform the nature of their operations or wind them down.
Since the end of the last century, non-governmental Organisations (NGOs) were part of widespread, sometimes violent, protests everywhere there's a meeting for the Fund, the Bank, or the WTO. Writing off the huge debt prohibiting economic improvement in poor countries became the main slogan of these protests.
Four years ago, the Fund and the Bank began a steady change in their policies to incorporate the remarks of both developed industrialised (rich) nations and NGOs advocating the cause of developing and under-developed (poor) nations.
In 1999, the IMF announced that, henceforth, poverty reduction will be the purpose of its lending operations and that it will rely on its partner, the World Bank, to ensure that this goal is realised. Borrowers and lenders will design countrywide strategies that provide the basis for groups of loan operations.
These strategies are to be designed with potential impacts in mind. IMF and World Bank will take into account the social and environmental impacts of countrywide strategies, such as the Poverty Reduction Strategy (PRS) Paper.
It is required that, in order to qualify for assistance, each low-income country government must work with its domestic civil society organisations (CSOs) to prepare the PRS Paper.
Attempts by the IMF and World Bank to become more open, transparent and accountable were welcomed by the big nations. As for peoples of the third world, there is still a deep gulf between the rhetoric of the IMF and World Bank and the reality of their operations. The credibility of the institutions hinges upon their response to this gulf between rhetoric and reality.
Weak response
A weak response will fan the fires
