Doug Hellinger, The Development GAP
The International Monetary Fund and the U.S. Treasury are making an
all-out effort to secure the funding necessary to make the Fund's controversial
Enhanced Structural Adjustment Facility (ESAF) self-financing. ESAF
has been used by the IMF since 1987 to shape the economies of the world's
poorest countries, including Bolivia, Guyana, Haiti, Honduras and Nicaragua
in this hemisphere.
Stung by the difficulty it encountered last year in gaining U.S. Congressional
approval for an IMF quota increase, the Treasury has sought to package
ESAF financing with the funding of the proposed Highly Indebted Poor
Countries (HIPC) multilateral debt-reduction plan for some of the same
nations in order to overcome Congressional opposition. Authorization
for HIPC financing has been before the Congress for some time, and it
is expected that the Clinton Administration will request support for
an IMF gold revaluation and investment plan that would finance both
debt relief and the current funding gap in ESAF. At the same time, the
Administration is asking for commitments from the other industrialized
countries for both bilateral and multilateral debt reduction in the
wake of the G7 decision in Cologne in July to expand the scope of HIPC.
Many Third World development groups -- including those in the debt-cancellation
advocacy network, Jubilee South -- are outraged at the prospect of having
the success of the global Jubilee 2000 debt campaign used to strengthen
the IMF and expand its power to impose structural adjustment programs.
They have seen their countries' economies gutted by these programs,
as import liberalization, high interest rates, the lack of government
assistance and diminishing consumer demand due to falling wages have
destroyed local businesses, small farms and the jobs they provide. They
oppose any adjustment conditionality attached to debt-reduction schemes,
including that found in the HIPC Initiative. For its part, the Treasury
has shown no willingness to delink debt reduction from the required
implementation of adjustment policies, which, critics charge, have opened
and restructured foreign economies for the benefit of international
investors.
Vulnerable to these criticisms and to the recent high-profile failures
of their policy prescriptions in Asia, Russia and Latin America, the
Treasury and the international financial institutions have lobbied Northern
Jubilee campaigns and other NGOs in the North for the critical support
they need for their debt/ESAF initiative. At the IMF/World Bank Annual
Meetings in Washington this September, the IMF publicly committed itself
to poverty reduction -- a subject on which it has demonstrated no knowledge
and little interest in the past -- renaming ESAF the "Poverty Reduction
and Growth Facility". Poverty Reduction Strategy Papers (PRSPs) will,
in the future, be required of governments, but they will be produced
"in close collaboration with Bank and IMF staff." They will be introduced
first in a handful of HIPC-eligible nations and eventually in all ESAF
countries.
Details on the exact nature of this poverty-reduction initiative will
not be available until late November or December, well after expected
Congressional action on IMF financing. While the Fund and the Bank have
acknowledged that, after 20 years of imposing adjustment policies on
countries across the globe, poverty and inequality have seriously worsened,
they will not address market liberalization, privatization, monetary
and related economic adjustment policies as sources of these growing
problems. The focus will be on health care, education and social policy,
rather than on the generation of wages and incomes sufficient to ensure
dignified living standards. Intermediate social indicators, such as
school enrollment and adequate health facilities, will be used to measure
progress toward achieving anti-poverty goals.
In fact, IMF Managing Director, Michel Camdessus, defiantly defended
adjustment policies at the close of the Annual Meetings. "[T]he so-called
bitter IMF medicine," he told the press, "...is very good medicine for
those who want to strive to improve the living conditions of their people."
This stance is consistent with the Fund's position on HIPC from the
start: that the initiative is designed to reduce the debt of those countries
that pursue "prudent" economic policies. The PRSPs would ensure that
a country's goals and plans for poverty reduction and social development
are consistent with these macroeconomic policies. And, for the foreseeable
future, the Fund will continue to use Policy Framework Papers, which
outline national adjustment programs, alongside the new PRSPs.
As a final irony, it will be the IMF and World Bank that will determine
the adequacy of national poverty-reduction plans. The result, if the
debt/ESAF plan were financed, would be an even deeper and broader involvement
of these institutions in the everyday management of national economies.
This article was reprinted with the permission of NACLA
(http://www.nacla.org/).
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