Newspaper The HINDU
Date 09/23/05
Article Donors and debtors
Author Sarah Hiddleston
Abstract Nairji
The espousal of democracy by Donor countries will ring hollow if fundamental changes are not made in the way the World Bank and IMF operate.
The Annual meeting of World Bank and IMF scheduled for Sep 24 and 25 will discuss the Africa Action Plan, debt relief and trade. The main topics for discussion will be review of World Bank's practice of attaching conditions to aid, its poverty reduction strategies adopted in 1999, how to operationalise G8's pledge to cancel all debt of 18 Heavily Indebted poor countries.
Use of policy conditionalities and debt relief by International Finance Institutions have been criticised badly. As a result, the World Bank and IMF made a commitment to poverty and community. A major reform was the introduction of Poverty Reduction Strategy
Programmes in which the low income countries can set out their priorities for development and obtain eligible debt relief on the basis of completed action plans.These programmes, however, contain policies on
privatisation, deregulation and trade liberalisation.
The Strategy Programmes had a poor track record of serving the needs of communities.Important insights into social, economic and political realities have been lost sight of.The water System Privatisation, began in 2003, in Dar es Salaam, Tansania was cancelled by the Government due to persistent complaints by residents.The private sector could not deliver the investment needs.
The Indian Experience.
In India , Orissa was the first state which was forced to agree to privatisation in power,by World Bank. But the state soon found that its fiscal position deterirated as a resultof debts incurred in this process.THe private companies breached their contracts by failing to invest new working capital in the sector. Half of Orissa's population remained without power.
The G8 debt deal did nothing to remove the economic conditionalities in debt relief, but it did pledge 100 per cent cancellation of debt for 18 countries.