My reflection is occasioned and motivated.
Occasioned by the interview given by the World Bank President to a news outlet in West Africa this March. The World Bank, (hereinafter referred to as the Bank) and the IMF (from now on referred to as the Fund) (both referred to as the Bretton Woods Institutions) are certainly recognized guardians of the current economic and financial order in the world. And in this order, there are countries not very much at ease, to say the least, and African countries are among these.
Motivated by the need to ask our leaders:
while this international order has a historical root;
while recognizing the enormous good work undertaken by the Bretton Woods Institutions; and
while acknowledging the stabilizing force they represent in the international financial marketplace,
We may be entitled to ask: how come after more than 60 years of independence for most African countries and of support from the Bank, many of us remain poor, if not poorer than at independence?
I attempt to address these questions by analyzing some of the coded languages in this interview, that I think hide the foundations that explain why we seem to be running in the same spot, by design. The topics I focus on are underlined mostly from the Bank President’s responses.
The interview itself can be found in the headline initialed by Aurelia M’Bida and posted on 4 April 2023:
Q: Why did you choose to come to Africa for this visit? What is the goal?
R: The goal is more development in Africa and we recognize these severe challenges facing the Sahel and also neighbouring countries in the Gulf of Guinea. Bottom of Form
The problems are the economic problems of rising interest rates, high prices and the shortage of capital inflows and there are also major security problems from the inflow of arms and from fragility. The World Bank is committed to working in fragile countries and also committed to development in Togo and in other countries of West Africa.
Considerations:
Rising interest rates: if the Bank president has been US Treasury Under-Secretary, he is really bringing the discourse of the interest rates to the helpless victim, not to the centre of decision on these problematic interest rates that are penalizing the world to-day, back in the Department he served. That is looking to the victim for explanations.
Security problems and fragility: it is no news that security problems in the Sahel he chose to visit were created by the brutal annihilation of the Libyan government and the willful killing of its Head of State, ousted by a coalition of US/France/UK. It does look lack of courage to now come and preach to us security and fragility instead of addressing the admonition to those who created such conditions of insecurity. The voices of Africa on the Libya issue were arrogantly dismissed as irrelevant. Today and for years to come, we will be paying the price of being ignored.
Commitments to work in fragile countries: Funny. I have worked in Niger myself. The country hardly has any electricity beyond a few derelict towns, but provides the uranium that illuminates the whole of France! Niamey is crossed by the Niger River, but water access in the houses is a serious issue. Where does fragility come from if not from the power imbalance in the terms of trade? Should the Bretton Woods institutions not focus on that imbalance and speak to those who cause and maintain this situation? Does Niger need to be told it is fragile?
Q: You have visited Niger previously, what kind of message did you deliver? What were your key points and angles you delivered maybe just before the Spring meetings?
R: The key message was that it’s urgent to take as many steps as possible now in terms of fiscal stability, in terms of private investment, and attracting investment in terms of trade, and also an awareness of global public goods. For example, adaptation to climate change. I commended Niger on having a democratic transition of power, maintaining stability within Niger and achieving recovery from Covid-19, but I also recognized the immense challenges facing Niger and the Sahel.
Considerations:
There is an assumption that development will mainly come through attraction of investments. That is what African countries have been doing all this time. Perhaps development will only happen if we do it differently. Our economies have all of them been formatted to serve outside economic interests: development of ports, railways and of roads from the interior to the coast, with very little, if any, road to ferry goods among African countries. Foreign investments are good but are not the panacea. We have seen huge mining investments coexisting with extreme poverty in the same towns in Mozambique, DRC, Zambia, Guinea, Niger, etc.
Q: What did you achieve at the Bank during your time, in particular for Africa?
A: In the four years of my term, I’ve really focused on how development outcomes improve for people worldwide, especially for people in Africa. That was my first trip as president and now I’m very happy to be in West Africa. First trip was to East Africa, this trip is to West Africa. The World Bank has made major expansions in its support for Africa – through the International Development Association (IDA), as well as the IFC and private sector efforts. That’s a key part of economic growth going forward. If we think about development, it rests on education, on private sector jobs and as we saw today, on agricultural and scientific or a practical application of science, the technology to daily lives to agriculture, to adaptation, and so that’s been important.
The second thing I’ll mention is that the world is currently facing a global crisis: the Covid-19 crisis; the Ukraine war, which puts extra pressure on developing countries; and now we have the sharp rise, sudden rise in interest rates in advanced economies. Therefore, one of my key messages is that the development challenge is getting harder, not easier, so I think the whole world has to focus on that. That means new techniques for development, new sense of urgency and it means new resources as well.
Considerations: pass
Q: What have been your top priorities for Africa during your term?
A: To urge the countries to focus on fiscal stability. That means budgeting processes and broadening the tax base so that they can be less dependent on external capital. Also on the private sector growth, which is so important for their job creation, to focus on education and especially education for girls, primary education and secondary education for everyone, and in including those are all high priorities. We’ve also talked with countries actively on that, and of course broadening access to electricity to clean water, to health services is vital. All of these are made more challenging by the global context and including climate change.
Considerations: Pass
Q: What role has the crisis played in the last few years? The role of the world’s largest multilateral financing institution seems to have changed, stepping from less project financing maybe to more emergency measures/support or support to specific sectors instead.
A: What we have done is, well, I’ll mention several things. One is to have fewer projects, less growth in the number of projects and more growth in the size of projects. So scale is important. If a project is working, let’s expand it. A second thing that’s important is the WHOLE bank approach to private sector development. That means the World Bank has to be very involved alongside IFC in helping countries improve their private sector activity and climate. That means changes in how the Bank operates to support the other groups in their goals. We are also working very hard on the debt overhang problem. As you think of the resource needs of Africa, one of the biggest potential sources is to reduce the outflow of debt that is from unsustainable situations. For all these years, even during crises, the countries are paying and paying and paying to creditors, even after debt situations are unsustainable, so we need a faster way to get to debt restructurings as a key resource for the poorest countries.
Considerations:
The focus on debt seems to message to us that we need to be in debt. Is that an economic absolute? It looks like there were countries that did fare very well for their people without debts. Libya was one such example and perhaps a “bad example” for the established economic order.
Resource needs of Africa: that seems like a discourse out of place. Africa seems to have in its collective inventory all the resources and the issue is the little room to exercise sovereignty over these.
Debt restructuring is a discourse that wants to make Africa accept debt as an inevitable economic philosophy. Restructuring is, for peoples who have increasing difficulties in accessing basic services like health, education, etc, a way of making debt acceptable and serviceable until we have no more energy left. Make us believe that this is the only economic model that should be followed. Then what? Why not buy time and, once you are weak and your people are exhausted and desperate because of poverty, come after our resources, including our land, to pay the debt? Debt restructuring is another way of saying, “shift the weight to the other side so your body can continue to carry it”. That is an economic doctrine we are being told to believe.
Q: How do you do that? Zambia, Ghana… How do you act as a World Bank group to tackle this debt problem?
R: When Covid-19 broke out, I called for a moratorium on the debt payments by countries as a response, as a key response to the pandemic and Kristalina Georgieva of the IMF joined me and we encouraged that effort. Unfortunately, the G20 didn’t extend that effort to the private sector and many of the creditors did not participate in the debt suspension initiative. It then became the Common Framework and we’ve been working with the IMF to accelerate the process of the Common Framework. I’ve initiated this round table that I will I co-chair with the IMF and with the G20 presidency, which this year is India, to bring together all of the parties to the debt restructurings. That includes all of the private sector creditors and the debtor country itself, along with the official bilateral creditors, which are the traditional group that decides the debt restructuring.
We need to have a more inclusive process and a faster process for resolving debt situations, such as the one in Zambia. It’s highly frustrating that Zambia has been working for well over two years and still doesn’t have an MOU for the debt restructuring. I am really strongly seeking a faster process that can work in Ghana, in Ethiopia and other countries as they face unsustainable debt situations.
Considerations:
Zambia was visited this year by three very important US personalities, and they did not offer any solution to Zambia’s persistent problem. The US Treasury Secretary, the Fund Managing Director and, if any higher you could go, the Vice-President of the United States. What are we saying here? Just that China is a bad influence? “Stay where you are and we will come rescue you?” Copper has been both an economic resource and a predicament since the times of Kenneth Kaunda. Zambia, as you can see from the short clip below epitomizes our predicament in Africa.
Q: Does there need to be institutional change so that the World Bank can react faster?
A: The World Bank is constantly changing and evolving. During the pandemic, we very quickly set up a fast-track process for the Covid-19 assistance and that was welcomed by the world. In 2020, we were able to initiate a great number of operations and then even more in 2021. This same is true in Ukraine and with some of the natural disasters. When Russia invaded Ukraine, the World Bank was able to very quickly set up trust funds to channel assistance to the non-military activities of Ukraine’s government. During crises, natural disasters, such as the earthquake in Turkey and others, the bank has been able to make decisions quickly and provide support.
We’re also doing that in the evolution of our products, our tools, so we’re expanding our disaster assistance and our ‘Cat DDO’s’ that’s catastrophe deferred drawdown options. We’ve also expanded rapidly within the IFC the financing for working capital that includes for trade finance, the short-term financing is vital during crises and the IFC has been able to even triple the amount of support through this area to companies which is important for supporting development. Now we’re embarking on a further evolution process where we are in the process of increasing our leverage ratio – it’s called the E to L ratio, and I expect the Governors during the Spring meetings to support a change from 20% E to L ratio to 19%. That’s the ‘equity to loan ratio’ of the bank, which will allow some $40bn more to be lent by IBRD over the next 10 years, so that’s an example.
We accelerated the replenishment from a three-year cycle to a two-year cycle, which allowed a big expansion of IDA [International Development Association, the Bank’s concessionary lending window], much of which has gone to Africa. In my four years at the bank, I was able to complete two replenishments of IDA, which normally would take six years, so I’ve been pleased with that. We’ve completed IDA 19 in 2020 and we completed IDA 20 in 2022. These are big achievements for the bank and for the international community. It’s the one spot where people put money together and that supplies non-fragmented assistance, particularly to Africa, and that’s fully leverageable. We issue bonds against the future cash flow of IDA and that’s a unique strength of the World Development community. That had never happened before, there has never been a two-year replenishment, so that was important.
We’ve also concretely changed to align our staff with the countries themselves, so we’re putting more staff into countries that the management of staff goes through the geographic areas. It’s been a significant change by the bank that we made in 2019 and in 2020. That has changed the structure of our offices and it’s been especially apparent in fragile countries where there are now sizable World Bank presence, including IFC presence and even we now have MIGA offices in Africa, which brings the World Bank closer to the clients. Those are all important evolutions and we’ve had substantial discussions in our board over the last three months on how to better handle global public goods, which is an important [aspect] of the challenges facing countries as every developing country knows, one of its biggest challenges is adjusting to the costs of climate change.
Considerations: pass
Q: Do you see the gross inadequacy of climate finance for developing economies as a global security risk given the mass displacement and economic pressure that extreme weather is already causing?
A: There are insufficient resources going to meet the climate costs and one result of that is it deepens the security problems for countries worldwide, that especially for countries in hard hit areas, such as the Sahel where I’ve been. That’s evident in the need to change farming practices for people faced with internal displacement because of changes in the climate and, of course, population growth in Niger. What we’ve done, we initiated a climate change action plan that was in 2020 that is focused on creating more projects that actually produce results for countries in terms of adaptation and mitigation activity. Therefore, it’s very important for the World Bank – as it thinks about, commits to and pledges more resources on climate – that it actually follows through with projects and that’s been a primary goal of the Bank.
Considerations: pass
Q: There is an unsaid rule that places an American in charge of the World Bank and a European leading the IMF. Do you think this rule has just come to an end?
A: I think the goal for the world is to have both of the institutions be effective, and my sense is that’s what world leaders are trying to achieve.
Considerations:
Fair response to a fairer question. Nonetheless, it must be acknowledged that the Bretton Woods Institutions were designed to respond to an historical reality largely overtaken and old. Like in the UN, newly-independent states and countries have attempted to adapt institutions designed for post-World War realities of Europe and America, to the new historical, political, social and spatial realities they represented as new nations. That shortcoming needs to be acknowledged, if we intend to adapt them. For instance, the rules of the Bank give France a voice (akin to a veto) over financial issues pertaining to its colonies. To-day, they are no longer colonies but France can still determine how the Bretton Woods institutions respond to the needs of its erstwhile colonies. That is in the rules of the institutions. Times have evolved, the institutions are defending an order that should evolve as well.
Q: What are you thinking about in terms of the future of the World Bank and your future? Did a stint of running the World Bank change your mind about anything?
A: It’s been a very busy six years for me too at the US Treasury Department as Under Secretary and then four years as president of the World Bank. It [has been a] really long career. I began working actively on World Bank issues in 1984 and I’ve committed to development and to the goals of having good outcomes for people in developing countries. I was very pleased and proud to have the opportunity at the World Bank to work to further those efforts and to really push forward. As I look forward, I’m exploring options, I expect to return to the private sector. That’s where I’ve spent most of my career and I’m looking forward to working on global affairs in that regard.
Considerations: Pass
CONCLUSIONS:
Sixty years of being told by the Bank how to run our economies, where has it taken us? Sixty years of following the same policies and expecting different results? I posit that the current international financial systems are not formatted to provide solutions to our economic and social crisis. Not even to talk about episodes such as COVID, future tsunamis and other natural disasters. They are maintained to perpetuate an order where the prosperity of one part of the planet is dependent on the poverty of the other part. Hence, for instance, the double-speak of the IMF Managing Director who, in a January 2023 declaration to journalists, managed to say in the same breadth:
“If a country is under water, providing more water – getting more debt- is not the best way to help”
And immediately she adds:
“The IMF will support the World Bank’s request to expand its lending capacity”
If this is not more debt, correct my understanding. Have we ran out of options, or are we forced to stay the course that has been determined for us?
The dissertation I make leads me to conclude, as other more learned personalities have concluded way before us, that development will not be brought from outside. We need to take the responsibility for our own. Why are we being limited to reducing poverty instead of eliminating poverty as the best outcome that we should pursue? Because it keeps poverty as a motivation and justification for programmes that perpetuate themselves, presented through initiatives that look like new. For instance, the eight MDGs of decades past have turned into seventeen SDGs since 2016 and we can expect these to turn into something else, designed to reduce poverty.
The Sahel is a case in point, as is my country. I have lived and worked in three Sahel countries for eight years (Niger, Chad, Nigeria) and could feel in my work, in my well-being at home after work, the heavy weight that these populations carry year after year, as a result of the destruction of the Libyan economy, government, and infrastructure. Then foreign armies have been brought in, and ISIS is today waived as a justification for the continuation of these armies in the region. War becomes self-justifying (you need to wage war because there is war!), a self-perpetuating industry, and a logic that sucks our prime energy. So, when the foreign armies are asked to depart, more security incidents happen, and the dominant media plays its assigned role of justifying and maintaining this (dis)order.
Reducing poverty, safety nets, cash disbursements, pro-poor growth,… we are all shamed into adopting a language that entrenches economic fallacies, unsustainable strategies that the only thing they sustain is a dependency order and mentality, and make the poor believe that this order is the best (only) solution. Too bad that resources needed in the world economy are in the poorest parts of the world. An unsustainable order, an illusion of peace.
If the Bretton Woods Institutions wanted to help, why not assist us in strengthening our capacities to mobilize internal (national) resources to end poverty? Timber, gold, rubi, oil, diamond, gas, heavy sands, fisheries, land, youth, you name it, we have it! What are our Ministers of Finance discussing with the Bank? How are our banks' businesses structured?
Just one example of how poverty is perpetuated: extraction: the gas in Northern Mozambique will be extracted, refined, packaged, and shipped to the international market from the high seas. Are there Mozambican engineers with the technical capacity to measure and confirm the quantities of gas extracted and marketed, or the companies extracting and benefitting will be the ones making these ledger declarations? Do you want to help?
It is time we call on our collective intellectual capacities to review old international rules, confront them with current realities and future trajectories of world relations, and propose new rules that respect sovereignty as a win-win for a future with dignity for all mankind, with no regrets and no losers.
We may need to develop our own economics theories and manuals.
We need courageous African leadership in Africa.
END
12 April 2023
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