By Patrick Bond
THE World Bank and International Monetary Fund (IMF)’s annual meeting in Washington last month witnessed the powerful members’ rejection of two big ideas – debt cancellation and institutional
Instead, important financial developments reflected Washington’s geopolitical imperatives in Iraq. World Bank and IMF activity there was relegitimised at the annual meeting, but in a contradictory and untenable manner.
A recent IMF report on Iraq dubiously claimed that “macroeconomic stability” has been achieved and the economy will have grown 52% in 2004.
This was in part justification for the IMF’s recent US$436 million loan to the Washington-imposed Baghdad regime.
Also last month, speaking at the UN Economic Commission on Africa in Addis Ababa, World Bank president James Wolfensohn predicted his institution would push more than US$400 million to the US-imposed Baghdad regime by the end of 2004.
Hypocrisy on debt relief – Iraq gets waves, Africa only trickles – worries not only advocacy groups like Jubilee South and its Harare affiliate, the Zimbabwe Coalition on Debt and Development, who insist on 100% cancellation. In early October even Malawi’s Finance minister Goodal Gondwe complained of double standards during the IMF/World Bank meetings.
The man the World Bank has chosen to do the job of loan pushing in a highly risky Baghdad environment is Christiaan Poortman, who is vice- president for the Middle East and North Africa region. What are his qualifications? I came across Poortman in Harare 10 years ago, and am compelled to remember his work as resident representative (1991-94), especially if the World Bank also takes on more “donor coordination” functions in Iraq.
Poortman, after all, already coordinates the multi-donor Iraq Trust Fund and disbursed US$60 million in grants for school building and repair. He pledged US$150 million in resources for water and sanitation, and, according to the bank’s press office, “also said he wants to turn some of the money pledged into financing for electrical and water projects that will be left unfunded because of the transfer of funds earmarked by the US for reconstruction to security spending”.
A year ago, the World Bank and United Nations estimated that US$35,8 billion would be required to meet Iraqi needs. Typical advice in their “Joint Iraq Needs Assessment” was “to encourage private sector participation in the state-owned enterprises (SOEs) along with separating the ownership responsibilities of government from its policy and operating responsibilities.
SOEs that are internationally viable will eventually be able to shoulder higher input prices as trade liberalisation frees controls on their output prices. Other SOEs will ultimately face adjustment pressures from the hardened budget constraints.”
Zimbabweans will recognise this sort of language. The 1990s Health minister Timothy Stamps, reported that spending on health was down by 37% per person from 1990-93, because Poortman considered health a social expenditure which “had to be cut”. The government had become “so miserly that we are killing ourselves because we want to save a few cents”, Stamps admitted.
This was just one of several problems Poortman faced winning hearts and minds in Harare. When the IMF and World Bank insisted on tighter monetary policy in 1991, interest rates on certain government securities rose from 27% to 44% in a single day, which shattered business confidence and caused stock market and property sector crashes.
Hence even conservatives grew fed up with the ineffectual Economic Structural Adjustment Programme (Esap) imposed from Washington.
Financial Times correspondent and UZ professor Tony Hawkins condemned Poortman’s dubious macroeconomic analysis in 1993. “Every year, the World Bank officials dutifully prepare invariably over-optimistic assessments designed to show the worst is past and that the client state, whose economy is under the microscope, is on the brink of sustained recovery.”
Hawkins renewed his criticism in 1995. “The World Bank’s conduct in the Zimbabwean case raises a very serious issue. If the bank had done its job properly, then Zimbabwe’s budget and public sector crises need not have reached the dimensions that they have since. The debt burden would be less; the new taxes to be imposed would be less severe and the public spending cuts less drastic . . . The bank has needlessly delivered 11 million Zimbabweans into the hands of harsher austerity than should have been necessary,” said Hawkins.
In a Financial Gazette article, Iden Wetherell agreed.
“Everybody repeats the official mythology that the recent drought has slightly derailed Esap, while insisting (the wish being father to the thought) that economic reform is otherwise on course. The most notable representative of this starry-eyed approach is the World Bank’s chief in Harare, Mr Christiaan Poortman. His emollient statements over the past 18 months reflect the devotion of a faith unmoved by facts.”
Myopically, in a review of the World Bank’s impact during Poortman’s stint, an internal report boasted that Poortman had “fostered an awareness of the need for a broad-based economic policy reform”. Indeed, “informal work and advice provided by the resident mission was instrumental” in shaping Esap even prior to Poortman’s arrival.
The following promises were extracted from President Robert Mugabe by the World Bank and IMF in the 1991 design of Esap: by the end of 1995 there would be a 25% cut in the civil service, and the demise of all labour restrictions, price controls, exchange controls, interest rate controls, investment regulations, import restrictions and government subsidies. Most were accomplished.
The World Bank’s 1995 Project Completion Report for Esap gave the best possible final grade for the first stage of the utterly failed programme – highly satisfactory. The bank acknowledged playing “a key role in the dissemination of the programme and in building support amongst the wider donor community”. Hence World Bank staff also rated their own performance as “highly satisfactory” (again, top marks) for identification and appraisal, and “satisfactory” for preparation assistance and supervision.
In the book Zimbabwe’s Plunge, my co-author Simba Manyanya and I looked back a decade on Poortman’s role, and argued that Esap fatally weakened the state’s developmental capacities. Social desperation worsened. Poortman’s reign included the first of several major “IMF riots” in Harare – and Esap was, in any case, unsuccessful in stimulating investment and capital accumulation.
All indicators of economic activity and social progress worsened during Poortman’s stay. Zimbabwe’s exemplary social policy during the 1980s – reducing infant mortality from 86 to 49 per 1 000 live births, raising the immunisation rate from 25% to 80% and life expectancy from 56 to 62 years, doubling primary school enrolment etc – witnessed ominous reversals.
In turn, Poortman and his colleagues created the conditions under which an official opposition based on the urban poor and workers emerged finally in 1999, leading Mugabe to zig-zag into left-rhetorical authoritarianism, as he desperately sought to retain power and patronage within a crumbling economy.
Recall the povo’s reaction to Poortman and Esap? Sidney Malunga, a progressive ruling-party MP until his suspicious 1994 death in a car accident, was brutally honest.
“To the masses of Zimbabwe, the poor people of Zimbabwe, the sum total of Esap can best be described as a loathsome economic monster which is ravaging and destroying decent lives by incapacitating the poor and further condemning them to abject poverty,” he said.
According to a survey of 200 poor people by the Africa Community Publishing and Development Trust at the end of Poortman’s Harare gig, “Esap was listed as a cause of poverty even more often than drought and the shortage of land. The combination of retrenchment on a large scale, with a sharp increase in the price of basic goods and having to pay for health and education, has driven many families into poverty.”
“Deep down,” wrote the great novelist Chenjerai Hove in 1994, “I harbour fear, a persistent fear which, like an ominous shadow, refused to abandon me. There is the smell of the structural adjustment programme in the wind, with its flags swamping those of political independence.”
“‘Sure Advice to Poverty’, local pub humorists have nicknamed this World Bank-IMF economic beverage. It tastes sour from the beginning, a cartoonist once wrote as he watched friends and foes losing jobs in Harare’s industries under the banner of die today so as to live tomorrow.”
It’s a fear that the wretched people of Iraq can now add to so many others.
Patrick Bond teaches at the University of KwaZulu-Natal and is co-author of Zimbabwe’s Plunge (Weaver, 2003) and author of Uneven Zimbabwe (Africa World Press, 1998).