Africa: Global Finance, 11/04/00

Africa: Global Finance, 11/04/00

Africa: Global Finance Date distributed (ymd): 001104 Document reposted by APIC

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Region: Continent-Wide Issue Areas: +political/rights+ +economy/development+ +US policy focus+ Summary Contents: This posting contains two documents on the power and policies of international financial institutions, particularly the IMF and the World Bank. The first is a speech by Archbishop Ndungane of Cape Town to an NGO parallel gathering to the meeting of G-20 finance ministers in Montreal. The second is an update by the 50 Years is Enough Network on legislation passed by the U.S. Congress. This mandates opposition to any loan by international financial institutions which requires user fees or service charges on poor people for primary education or primary health care.

In a related development, the non-governmental watchdog group Bank Information Center is requesting support for demands for public disclosure of the full range of bank documents related to structural adjustment and other loans. For more information, visit the Bank Information Center web site ( or contact Graham Saul at the Center (phone: 202-624-0626; fax: 202- 737-1155; e-mail: The Center's update and request for signatures on a Global Call for Greater Transparency can also be found at

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DEFINING THE GOALS OF THE NEW STRUGGLE: Power of financiers versus power of the people

By Njongonkulu Ndungane,

Archbishop Njongonkulu Ndungane is the Anglican Archbishop of Cape Town. This is an excerpt of a talk he gave in Montreal on Saturday. It previously appeared in Business Day (South Africa) October 23, 2000

Archbishop Ndungane was speaking at a Teach-In on Transforming the Global Financial System, organized by the Halifax Initiative Coalition to coincide with the meeting of the G-20 finance ministers in Montreal (October 24-25). The G-20, set up "to promote international financial stability, includes: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, United Kingdom, United States of America, as well as the European Union, the IMF and the World Bank.

For official information on the G-20, see the G-20 web site ( Additional information on the teach-in and related topics can be found at the non-governmental site (


THE G-20 meeting that was held in Montreal, Canada, at the weekend offered an opportunity to the international community to reflect on where both official and popular reactions to financial globalisation are headed.

SA Finance Minister Trevor Manuel could not have captured the dilemma facing the world more aptly when he left last month's annual meetings of the World Bank and International Monetary Fund (IMF) a day early, in the wake of disruptive demonstrations in Prague, shaking his head: I know what the protesters are against, I just don't know what they're for.

And indeed, what are we up against? The two consistent threads of concern in relation to international finance are instability and systematic injustice.

Manuel is well placed as a respected politician and chairman of the IMF/ World Bank board of governors to influence reform to both ends. His attempts at changing voting rights and governance in the Bretton Woods Institutions, and his arguments for more debt relief, are also to be supported. But they don't go nearly far enough.

In contrast, the parallel Montreal meeting of nongovernmental organisations (NGOs) and social/church movements debated more creative options, including exchange controls, a redirection of domestic investment into productive activity and credit aimed at those who most need it.

But for all these measures to succeed we must first define the main constraints to social progress. These undoubtedly include the two Washington institutions recently labelled by Harvard University's Jeffrey Sachs as masters of deceit.

US Treasury Secretary Larry Summers continues to use his veto power over top personnel in the World Bank. Two leading bank reformers Joseph Stiglitz and Ravi Kanbur have resigned in disgust over the past year. And the bank continues to impose full cost-recovery requirements on even water supply, with the result that when low-income households can't pay their bills they are cut off. As SA has seen in KwaZulu-Natal, people then become more vulnerable to expensive health ailments.

Last week, the US Congress considered legislation proposed by progressive NGOs which would prohibit the World Bank and IMF from imposing user fees on primary health care and education. I am informed that Summers remains adamantly opposed to the bill and will probably have it vetoed [but see update below].

Reform while Summers holds veto power over IMF/World Bank decisions is, it appears, utopian. That is why the global movement for justice is making the case that Washington's financial boot, now pressed against Africa's neck, must be lifted, even if that means abolishing the bank and IMF.

Because many World Bank/IMF loans to Africa are channelled to repay old loans and to import luxury goods for the elites, mobilising domestic resources would be far preferable, even if that means more expansive monetary policies as a substitute for foreign loans.

Through campaigning by the Jubilee 2000 movements across the world, debt cancellation is also closer. The return of stolen wealth such as former Nigerian dictator Sani Abacha's Swiss bank hoardings, and reparations for what technically can be termed odious debts already repaid, are also on the agenda.

If the World Bank, for instance, was serious about owning up to past mistakes and malpractice, it would take responsibility for its 200m in loans to apartheid, its rejection of a UN general assembly mandate not to lend to Pretoria in 1966, and the fact that $100m in Eskom credits during 1950-60 helped expand SA electricity supplies but only for white households, although the entire society repaid those loans.

Surely reparations would help clear the bank's conscience?

In recent months I have raised the Swiss banks apartheid debt directly with their government officials and I hope that instead of waiting the five long decades they did before reimbursing Nazi victims, we may soon see some kind of southern African reparations fund for apartheid's victims to which Swiss and other European and US financiers will willingly contribute. This initiative is important as a disincentive for these banks to ever fund apartheid or similarly despotic regimes again.

Commercial banks will always hesitate to consider moral issues, but the World Bank's rhetoric on governance leads us to believe that bank president James Wolfensohn may look at reparations more seriously. Rhetoric is easy, however, and if moral carrots such as the opportunity to provide reparations do not work, there is also a stick.

Jubilee 2000 SA [South Africa] was one of the initiators of a World Bank bonds boycott to defund the bank by having pension funds, church and university endowments, and municipalities tell their investment managers not to buy bank bonds.

Through such tough tactics the global movement for justice is introducing social values to an economic system that often seems topsy-turvy. But we also will recognise the importance of restoring national sovereignty over capital flows. To that end, debates continued this weekend over the apparent success of Prime Minister Mahathir Mohamad's exchange control system in Malaysia, endorsed by some leading economists.

A Tobin tax of 0,5% on international financial transactions was recommended by the Canadian parliament last year. SA lags behind, having dropped its main capital control the rand in 1995, at the expense of seeing much wealth immorally accumulated during apartheid leave the country and leaving our currency extremely vulnerable to the kind of havoc experienced in early 1996, late-1998 and at present.

And as for mobilising our own internal development finance resources, everyone now recognises that government has been lackadaisical in regulating banks to serve society's interest. The marches against financial injustice in SA on Saturday, catalysed by the SA Communist Party, may have forced authorities to finally gain the political will to stiffen a spine that has so far bent over backwards in the bank's interest.

At the end of the day, this is about power: the power of international and local financiers and allied bureaucrats versus the power of people. I have been through such a power struggle once before and will be with the global movement to the end of this one.


speech previously posted by:

World Bank bonds boycott campaign, Center for Economic Justice, 1830 Connecticut Ave., NW, Washington, DC 20009 phone: (202) 299-0020 fax: (202) 299-0021 web:

To stay updated on the World Bank bonds boycott, join their listserve: Send blank e-mail to


50 Years is Enough Network

Analysis of the User Fee Provision Passed by the U.S. Congress PLUS A Request for Information, Especially From the South

Last week we posted a press release and a news story on the victory in the U.S. Congress regarding "user fees," the charges that many IMF and World Bank programs insist on for services like education and health care.

As you might remember from those postings, Congress has mandated that the U.S. representatives to the boards of not only the IMF and World Bank, but also the regional multilateral development banks (Inter-American, African, Asian, and possibly some smaller institutions) oppose any programs that include requirements that user fees be charged to the poor for provision of primary health services or primary education.

The bill has been passed by both the House and the Senate, and is awaiting the President's signature; there have been no threats to veto the bill.

We want to express a huge THANKS to the many activists around the country who responded to our alerts. Your calls and letters had a major impact. This genuine step for a measure of justice for people in the South (and East) could not have been achieved without you.

Below is the actual legislative language:



Sec. 596. The Secretary of the Treasury shall instruct the United States Executive Director at each international financial institution (as defined in section 1701(c)(2) of the International Financial Institutions Act) and the International Monetary Fund to oppose any loan of these institutions that would require user fees or service charges on poor people for primary education or primary healthcare, including prevention and treatment efforts for HIV/AIDS, malaria, tuberculosis, and infant, child, and maternal well-being, in connection with the institutions' lending programs.


Attached to that is explanatory language, which provides more detail on what Congress demands:

Joint Explanatory Statement of the Conference Committee: Sec. 596. User Fees

The conference agreement includes a provision which requires the United States Executive Directors at all multilateral development banks and the International Monetary Fund to oppose any loan which requires user fees or service charges on poor people for primary education or primary health care. The managers further agree that user fees should not be imposed or required through Bank or Fund sponsored `community financing,' `cost sharing,' or `cost recovery' mechanisms prepared in conjunctions with loans, structural adjustment schemes or debt relief actions.

The managers direct that the Committees on Appropriations be notified within 10 days if any loans, community financing, cost sharing, or cost recovery mechanisms requiring the imposition of user fees are approved by any multilateral development bank or the International Monetary Fund.



The Good News:

This is the first time that the U.S. Congress has taken enforceable steps to have a concrete influence on the policies mandated by these institutions under structural adjustment programs. The original amendment called for the requirement to be delayed until 2002, but now the provision will take effect from the time of the President's signature.

Another improvement over the original language is that this goes beyond the IMF and World Bank to include the regional development banks. These institutions frequently follow IMF/WB policies, and likely have a number of programs supporting the imposition of user fees for health & education.

The enforcement mechanism here (the last paragraph) is interesting -- requiring that the Treasury Department report to Congress within ten days on the passage of any program with user fees. Although it doesn't literally "enforce," this move says "tell us each time the institutions go against our position" AND "tell us any time there are fees that you did not think it necessary to oppose." This is designed to make sure the Executive Directors signal U.S. opposition to discourage Treasury from applying its own judgement about how to signal opposition and when to desist from doing so. Previous attempts to influence policy at the institutions has called for the Executive Directors to use their "voice and vote" -- something they ducked by explaining that votes are seldom taken and minutes of their conversations are not made public. This enforcement mechanism, attached to an appropriation bill, contains within it the implication that future appropriations may be held up if user fees continue to be imposed.

While the U.S. cannot simply legislate policy changes at multilateral institutions, it is very influential. Its position on an issue can have a persuasive effect on other governments, and can be taken as a policy guideline by the institutions themselves.

The best news, of course, is that by passing this amendment, we may actually succeed in eliminating some of the most egregious obstacles to people getting the health care and education that they need.

The Less Good News:

The original amendment had a stronger enforcement mechanism: the threat of a cutoff of funds for the institutions if they were still imposing user fees in 2002 (the one-year delay would have given them a chance to reform gradually, you see). The IMF and World Bank usually prove impervious to demands for change from the outside unless their money is threatened, so we felt this threat was the best way to go. However, it did not survive the political negotiations around the appropriations bills. We can take some consolation from that fact that the enforcement mechanism detailed above has never been tried before, and looks promising.

However, the multilateral institutions and the Treasury Department are adept at circumventing demands they don't like. We shall have to be vigilant as this law comes into effect to see if it is being obeyed. In terms of making sure this law is followed, we are hampered by the fact that the Treasury Department, which is charged with following it, was opposed to it. We can therefore not be confident that they will adhere to it without prompting and monitoring.

Request for Information

This provision will become law soon. We need to hear from our colleagues in borrowing countries about new World Bank, IMF, IBD, AfDB, and ADB programs that mandate user fees for education and health care. Please monitor the introduction of such fees in your country and the reason for their imposition. Send information to us at <> and/or <>.

Thank you!

Soren Ambrose 50 Years Is Enough Network Washington, DC USA


Message-Id: <> From: "APIC" <> Date: Sat, 4 Nov 2000 17:18:31 -0500 ubject: Africa: Global Finance

Editor: Ali B. Ali-Dinar

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