IMF and World Bank making Crisis Worse

 

     

 

The environmental group ‘Ecologistas en Acción’ recently petitioned Elena Salgado, vice minister of the Economy not to use public money to prop up Bretton-Woods establishments that have aggravated the global problem of foreign debt, climate change and world poverty. The G-20 summit agreed to an additional $1.1 trillion  in the form of loans administered by the same financial institutions (World Bank Group and the International Monetary Fund), which have caused the global economic crisis, and have, over the past 30 years imposed neoliberal policies and structural adjustments forcing public spending cuts. The Ecologistas are concerned that the additional resources will enable the IMF to discipline countries affected by the crisis in the wrong way, making it even worse for them. The IMF and World Bank has not only caused mass unemployment, prevented countries feeding their population, privatized public services, extracted non-renewable resources and forced deregulation of financial industries, but has also created a huge foreign debt, one of the cornerstones of world poverty. By strengthening the IMF and World Bank, tripling the available resources, it will create a new global debt crisis that will deepen inequalities. Of the $1.1 billion, $50 billion, or less than 5%, are for the 49 most impoverished countries in the world. The largest part of the IMF loans is only available if the economy of these countries is falling apart. At least $250 billion of funding for trade will be driven by the much-criticized export credit agencies.
""The IMF continues to make loans during the crisis with conditions that will impact negatively on poor people. The loan to Pakistan in November 2008 came with the requirement to raise the tariffs of electricity and has left Pakistan with no choice but to cut public spending and take other steps to cover the budget deficit target of 4.2 percent by the end of June 2009, as agreed with the IMF. The old recipes of tight fiscal policy, cuts in public spending, and keeping inflation under control guide the Fund’s recommendations to the countries assisted. To the extent that the deepening recessions in borrowing countries, in order to comply with the strict spending limits set in the IMF programs can be difficult without cuts in public services and social services. The external debt payments are an important component of capital outflow from Africa, Asia and Latin America. The external debt of countries in sub-Saharan Africa has tripled during the 80s and 90s, many of them spend up to 40% of their GNP to pay the debts. After years of campaigning by activists against the debt, it is now officially recognised that this situation is economically unsustainable and a serious obstacle in dealing with the terrible social and economic problems, and the environmental impact in Africa.

Hungary turned to the IMF for $16.000 million and the program required deep cuts in government spending. Additionally, all public sector employees face losing their annual bonus, worth almost 8% of their salary, and pensions are also being cut.
Furthermore, the World Bank continues to promote the global addiction to fossil fuels. Although the global energy sector is responsible for most emissions of greenhouse gases, energy sector loans from the World Bank have doubled, providing approximately $1,000 million in projects related to coal. During the fiscal year 2008, the World Bank Group increased funding for fossil fuels by 102%, with only 11% grants for renewable energy. The World Bank is involved in many projects such as the development of the offshore oil field Jubilee (Ghana), or the expansion of Eskom, the largest South African energy company. Eskom supplies 95% of electricity in South Africa, of which 90% is generated with coal.

The study of the Bank Information Center in Washington found that World Bank lending projects for the fiscal year 2008 amounted to approximately seven percent of total annual CO2 emissions from energy sector throughout the world. Each fiscal year in which the World Bank supports a project based on coal, gas and oil, represents a commitment of 20 to 50 years to energy-intensive carbon. In addition, many of the large Bank projects related to pipelines and gas extraction and oil cause serious human rights violations and seek to export to rich countries, fuelling their dependence on fossil fuels, and increasing their Ecological Debt. The Ecologistas call on the Spanish government to cut completely any input into the World Bank and IMF, and invest public money in the conversion of Spanish industry to an economy based on renewables. This requires innovative public policies and political will.

 

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