The IMF and World Bank: Poverty Reduction and Growth? Or the Same Old Formula?
Washington - Monday, April 14, 2003 - by: Mark Weisbrot and Debayani Kar
calm	As the International Monetary Fund and World Bank officials convene for their annual Spring meetings this weekend amidst Washington's blooming cherry and magnolia blossoms, they will be breathing a sigh of relief. Unlike in 2000, when thousands of angry protesters converged on Washington, or the Prague street demonstrations the following fall that caused them to fold up early, their meetings will take place in relative calm.
inflicting pain on the poor	The Fund and the Bank claim to have heard and answered their critics, and in 1999 they created a new lending program called the Poverty Reduction and Growth Facility. Its previous incarnation was the Enhanced Structural Adjustment Facility, and the words "Structural Adjustment" had become a catch-all phrase for the pain inflicted on poor people in developing countries by faceless bureaucrats based in Washington.
poverty reducation	But the new lending facility was supposed to be more than just a name change.
	"Central to the Poverty Reduction and Growth Facility is the principle of broad public participation and greater country ownership,"
	said the IMF,
	".with active participation by civil society--including the poor..."
	In addition, the Fund was now committing itself to poverty reduction as an explicit goal of its lending and macroeconomic policies.
privatize urbanize	Now let us look at this project in practice. As a requirement for lending, the government of Sri Lanka -- with considerable help from the IMF and the World Bank -- drew up its Poverty Reduction Strategy Paper (PRSP) last year. The paper is chock-full of the IMF/World Bank's standard policy prescriptions. These include an increased role for the private sector in education and health care, labor law reform to make it easier to fire workers, and land-law reform designed to help bring millions of Sri Lanka's mostly rural population into the cities.
catastrophic	The Fund and Bank's plans for the rural population are potentially catastrophic, reminiscent of the enclosure movement during England's industrial revolution. The PRSP anticipates increasing the country's urban dwellers to 50 percent of the population, from the current 23 percent -- over the next eight years! Where will all these refugees from the countryside be employed?
social progress	The Sri Lankan case is also striking because the country has been relatively successful in its social as well as economic progress -- as compared to other countries at its income level -- over the last two decades, in spite of a terrible civil war since 1983 (currently there is a cease-fire and peace negotiations are proceeding). Life expectancy in Sri Lanka is 73.1 years and literacy is 91.6 percent. This compares to 65 years and 68.6 percent in Guatemala, which has slightly more income per person.
IMF & WB slowdown	Over the last 20 years of IMF and WB-directed reforms, the vast majority of low - and - middle - income countries have suffered a drastic slowdown in economic growth. Sri Lanka has not: income per person grew by 91 percent from 1980-2000.
textbook models	Given Sri Lanka's success relative to the IMF and World Bank's main clients, it is strange to see the Fund and Bank economists so eager to transform the country's economy according to their textbook models.
little consultation	As for the required consultations with civil society, these appear to have been very minimal, with organized labor excluded entirely. And the PRSP document was only available in English, which is not spoken by the majority of the people (especially the poor).
failure	The IMF has good reason to think they will not be held accountable if their experiment in Sri Lanka fails. Over the last decade the Fund's economists have presided over some of the worst economic collapses in world history. Russia lost half of its national income under IMF programs in the nineties (and resumed growth after the Fund-supported currency regime collapsed in 1998). Argentina went from IMF poster child to basket case and has yet to pull out of its deep depression.
no responsibility	In these and many less prominent failures, Fund economists were able to wash their hands of the whole mess and blame it on the locals, even when their own prescriptions were followed diligently. So who is going to notice what they do to Sri Lanka, a country the size of West Virginia with 19 million people?
dangerous	The IMF and World Bank are among the most powerful institutions in the world, because of their ability to cut off credit -- not only from themselves, but from other sources as well -- to countries that do not accept their advice. The case of Sri Lanka illustrates how dangerously unaccountable they remain, and how little they have traveled down the road to reform.
Mark Weisbrot
	Research Associate Debayani Kar
	Co-Directors Center for Economic and Policy Research 1621 Connecticut Ave NW, Suite 500 Washington, DC 20009-1052
	distributed to newspapers by Knight-Ridder/Tribune Information
References:
	International Monetary Fund - About the IMF
	Global Economy , World Bank / IMF Fact Sheet , a well written explanation of the effects of these agencies upon the poorer countries of the world.
	World Bank web site
	Sri Lanka - Country Study
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