The World Bank and the IMF
Welcome back to this edition of Water, Politics and Africa! This week I will take a look at the role of the World Bank and the International Monetary Fund (IMF), two organisations that are deeply involved in many hydrology- and development-related projects in Africa, even though many people know very little about them and their interests.
Introduction
If you have little idea about what these two institutions are and what exactly they do, then do not worry - most people feel the same. Having immense funds at their disposal and being involved in all sorts of conferences, development programmes and government deals while having close to no public image, to ordinary people they may appear like suspicious shadow organisations that influence all sorts of international developments.
World Bank and IMF - What are they?
According to the online investment encyclopaedia Investopedia, "The IMF exists primarily to stabilize exchange rates, while the World Bank’s goal is to reduce poverty."(Investopedia) They were both founded in 1944, under the authority of the US, as part of the Bretton Woods system initially with the purpose to rebuild international economic order after the end of World War II through world-wide loans and investment, through funds given to them by their member nations.
Today, the IMF deals mainly with "promoting exchange rate stability," "overseeing the international monetary system" and "providing short- to medium-term credits," while the World Bank on the other hand "seeks to promote the economic development of the world's poorer countries" through "long-term financing of development projets and programmes," giving "special financial assistance" and "encouraging private enterprises" (IMF). According to Investopedia, the IMF gets itself involved in many government bailout or rescue deals in the developing world, which because of their associated high interest rates attract the criticism that their aim is only really to protect the stability of international trade rather than sustainably helping the affected country. It is also acknowledged that these individual roles of the two organisations can become "blurred" (Stein, 1992), making it even more difficult to distinguish between them. While the World Bank also gives out loans, it specifically wishes to promote development and reduce poverty through funding projects, and does not get itself involved in more controversial bailouts.
World Bank and IMF Projects
In readings I have done, the IMF and World Bank seem to appear mostly whenever something has gone wrong, especially in regard to privatisation, and to provide financial assistance and guidance in exchange for something like a promise of 'doing things the way we want you to.' In Tanzania, for example, privatisation of Dar El Salaam's failing water supply was a condition for the country's qualification for the IMF & World Bank HIPC (Highly Indepted Poor Countries) initiative, which provides debt relief and low-interest loans.
We can also go back to the quote from my 2nd blog post, where Thompson et al. (2000) assess that "privatisation of water and health services in East Africa have taken place on a grand scale since the structural adjustment era of the 1980s, but not in ways that fit easily with the World Bank or IMF prescriptions.” What prescriptions are meant by that? The authors were most likely commenting on how the privatised water services had mutated into a state where they depended on "the increased role of the voluntary sector but also the continued centrality of the state - and foreign donors," i.e. they were not very 'private' at all, which the two did not approve of.
So what does an ideal World Bank/IMF project look like, according to the organisations themselves? Water-related projects account for 11% of the World Bank's current lending, and on its homepage the World Bank uses a reservoir-building project in Togo as a case study for successful investment (World Bank). In the village of Edoh-Wowuikopé, frequent flooding would cause destruction, crop failure and through a fall in productivity lead to widespread poverty. Using a World Bank loan, a reservoir was constructed by local workforce to abstract flood water and later use it for irrigation. Flood damage was minimised, and through a new irrigation scheme which included the building of canals, horticulture was boosted. While the description made the project sound like a full success, one could ask how costly maintenance of the reservoir and irrigation scheme are and whether the community can afford this maintenance, as well what exactly the 'horticulture' scheme is. Can the community grow local crops for self-sufficiency or does the World Bank want cash-crops to be produced for the international market?
Conclusion - Defender of Western Interests or Vital Tool for Growth?
It seems to me that the World Bank and IMF act in disagreement with the conclusion I have come to in my previous blog posts, which is that the encouraging of a switch from public to private ownership or vice versa does not generally offer practical solutions to the problems on the ground, and is more of a distraction from what could be more effective ways to encourage development. Yet the World Bank and IMF demand exactly this, and with the offer of much-needed debt relief and investment developing countries often don't really see any alternatives to complying, whatever the terms may be. While the accusations of acting mainly for the interest of the Western-dominated globalised trade system may or may not be true, one can definitely sense that ideologically affecting developing countries, including in Sub-Saharan Africa, is unreasonably important to the two western-dominated organisations.
Nevertheless, the World Bank and IMF provide loans, grants and investments that developing countries in Africa desperately need, and there have been many many projects in place that genuinely succeeded, as well as show signs of a more 'bottom-up' approach, as encouraged by the UN Agenda 21 sustainable development goals (Article 18.9, Agenda 21), for example handing out hand water pumps and promoting sustainable management of wetlands. The World Bank and IMF are products of Western ideology and thus are unlikely to change their approach unless that ideology changes beforehand, but to all those who believe in the success of loans and investment to achieve development, they are key instruments that cannot be replaced or thought away.
Introduction
If you have little idea about what these two institutions are and what exactly they do, then do not worry - most people feel the same. Having immense funds at their disposal and being involved in all sorts of conferences, development programmes and government deals while having close to no public image, to ordinary people they may appear like suspicious shadow organisations that influence all sorts of international developments.
World Bank and IMF - What are they?
According to the online investment encyclopaedia Investopedia, "The IMF exists primarily to stabilize exchange rates, while the World Bank’s goal is to reduce poverty."(Investopedia) They were both founded in 1944, under the authority of the US, as part of the Bretton Woods system initially with the purpose to rebuild international economic order after the end of World War II through world-wide loans and investment, through funds given to them by their member nations.
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| Jim Yong Kim & Christine Lagarde, heads of World Bank and IMF, resp. Source |
Today, the IMF deals mainly with "promoting exchange rate stability," "overseeing the international monetary system" and "providing short- to medium-term credits," while the World Bank on the other hand "seeks to promote the economic development of the world's poorer countries" through "long-term financing of development projets and programmes," giving "special financial assistance" and "encouraging private enterprises" (IMF). According to Investopedia, the IMF gets itself involved in many government bailout or rescue deals in the developing world, which because of their associated high interest rates attract the criticism that their aim is only really to protect the stability of international trade rather than sustainably helping the affected country. It is also acknowledged that these individual roles of the two organisations can become "blurred" (Stein, 1992), making it even more difficult to distinguish between them. While the World Bank also gives out loans, it specifically wishes to promote development and reduce poverty through funding projects, and does not get itself involved in more controversial bailouts.
World Bank and IMF Projects
In readings I have done, the IMF and World Bank seem to appear mostly whenever something has gone wrong, especially in regard to privatisation, and to provide financial assistance and guidance in exchange for something like a promise of 'doing things the way we want you to.' In Tanzania, for example, privatisation of Dar El Salaam's failing water supply was a condition for the country's qualification for the IMF & World Bank HIPC (Highly Indepted Poor Countries) initiative, which provides debt relief and low-interest loans.
We can also go back to the quote from my 2nd blog post, where Thompson et al. (2000) assess that "privatisation of water and health services in East Africa have taken place on a grand scale since the structural adjustment era of the 1980s, but not in ways that fit easily with the World Bank or IMF prescriptions.” What prescriptions are meant by that? The authors were most likely commenting on how the privatised water services had mutated into a state where they depended on "the increased role of the voluntary sector but also the continued centrality of the state - and foreign donors," i.e. they were not very 'private' at all, which the two did not approve of.
So what does an ideal World Bank/IMF project look like, according to the organisations themselves? Water-related projects account for 11% of the World Bank's current lending, and on its homepage the World Bank uses a reservoir-building project in Togo as a case study for successful investment (World Bank). In the village of Edoh-Wowuikopé, frequent flooding would cause destruction, crop failure and through a fall in productivity lead to widespread poverty. Using a World Bank loan, a reservoir was constructed by local workforce to abstract flood water and later use it for irrigation. Flood damage was minimised, and through a new irrigation scheme which included the building of canals, horticulture was boosted. While the description made the project sound like a full success, one could ask how costly maintenance of the reservoir and irrigation scheme are and whether the community can afford this maintenance, as well what exactly the 'horticulture' scheme is. Can the community grow local crops for self-sufficiency or does the World Bank want cash-crops to be produced for the international market?
Conclusion - Defender of Western Interests or Vital Tool for Growth?
It seems to me that the World Bank and IMF act in disagreement with the conclusion I have come to in my previous blog posts, which is that the encouraging of a switch from public to private ownership or vice versa does not generally offer practical solutions to the problems on the ground, and is more of a distraction from what could be more effective ways to encourage development. Yet the World Bank and IMF demand exactly this, and with the offer of much-needed debt relief and investment developing countries often don't really see any alternatives to complying, whatever the terms may be. While the accusations of acting mainly for the interest of the Western-dominated globalised trade system may or may not be true, one can definitely sense that ideologically affecting developing countries, including in Sub-Saharan Africa, is unreasonably important to the two western-dominated organisations.
Nevertheless, the World Bank and IMF provide loans, grants and investments that developing countries in Africa desperately need, and there have been many many projects in place that genuinely succeeded, as well as show signs of a more 'bottom-up' approach, as encouraged by the UN Agenda 21 sustainable development goals (Article 18.9, Agenda 21), for example handing out hand water pumps and promoting sustainable management of wetlands. The World Bank and IMF are products of Western ideology and thus are unlikely to change their approach unless that ideology changes beforehand, but to all those who believe in the success of loans and investment to achieve development, they are key instruments that cannot be replaced or thought away.
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