The Effects of the World Bank and the IMF on the Economies of Developing Countries
Introduction
Technological advancements and innovations have been dictating the turn of the present modern civilization. The current setting at present upholds an environment that answers to the global needs of the world. Collectivism in the concept of global community has been the popular ideal for the last couple of years wherein development and progress of nations are becoming more and more dependent to each other. Internationalization of industries is now the current trend amongst business organizations in its aim to increase market share and accumulate larger profit. However, this is not always the case especially among nations with poor living quality which at present cannot go hand in hand with the more economically progressive and developed nations.
Countries living in the poverty line have long been exhausting means and resources to alleviate the living conditions of its people. Third world countries in particular have been in the hopes of gaining economic stability that will assure the future of the descendants of today’s population. These nations at present place their stakes in the market entrance of foreign investors that provide capital for local business ventures that will employ the people in the locality. In the past decades, most especially after the Tsunami disaster and hitherto Dafur crisis, we have seen a new agitation and concern by the international communities to come to the aid of poverty striking communities and/or countries by increasing foreign aid and debt cancellation. The aftermath of this disaster has brought to the fore the need for all the stakeholders in the globalized world to act to restore confidence and stability in the world system.
This paper presents discussions regarding the general assistance activities initiated by the World Bank (WB) and the International Monetary Fund (IMF) to promote economic developments among Third World countries. The discussions include the organizational profiles of the WB and the IMF, their functions, their influence and the impact of their conditions top the sovereignty of developing countries, cases of loan assistances initiated, the impact of corruption to the economies of developing countries, the role of the WB and IMF in decreasing corruption, the economic assistance to the privatization of Jordan’s sectors, comparison of successful and failed loan assistances in Africa, debt cancellation hopes of developing countries, debt cancellation to increase economic reforms in developing countries, and debt cancellation to reduce the economic gap between the developed and developing countries.
Organizational Profiles of the World Bank (WB) and the International Monetary Fund (IMF)
In 1944, right after the World War II, 730 policy-makers from 45 different countries participated in the economic conference held in Mount Washington Hotel in Bretton Woods, New Hampshire in order to put order the international finance system and ensure that a liberal capitalist world economy through multilateral institutions that will oversee and administer international free capital movement. As a result, the World Bank (WB) and the International Monetary Fund (IMF) was founded as autonomous agencies of the United Nations (UN) (Orr, 1990).
The International bank for reconstruction and Development (World Bank) primarily offers post-war development loans to finance infrastructure projects at the same time promotes private foreign investments through guarantees to investments initiated by private sectors. On the other hand, the IMF manages and regulates international commerce by minimizing foreign exchange restrictions and providing reserve funds for countries experiencing temporary problems on balance of payments in order to fuel and thereby, encourage active international trading (Danaher, 1994).
Functions of the World Bank (WB) and the International Monetary Fund (IMF) to Developing Countries
Developing countries are often characterized as countries that posses relatively low standard of living, undeveloped industrial base, and moderately low human development index (HDI). It is otherwise termed as poor nations, Third World, less developed countries (LDCs), least economically developed countries (LEDCs), “underdeveloped or undeveloped nations”, the South, and non-industrialized nations. These states are the opposite of rich nations, First World nations, developed countries, the North, most economically developed countries (MEDCs), and industrialized nations (Wikipedia, 2006). Among the states categorized as developing are China, Mexico, India, Brazil, most countries in Africa like Somalia, Sudan, Ethiopia and South African nations, other Asian states such as Indonesia, Malaysia, Singapore, Thailand, the Philippines, and Brunei.
Basically, development of countries is based into economic foundation but it is often argued that such depiction is not accurate. There are other determinants of development such as those present in every given society like education and literacy, life expectancy, healthcare, and other factors present in social development and the likes. In relation to this, The World Bank (2006) classified countries according to data reported in terms of operational and analytical purposes. Operational categories are low-income, middle-income, high-income economies. Analytical purposes include geographic regions, income group, and indebtedness. In geographic regions, low- and middle- economies are referred as developing countries. This implies that every existing economy of the group is experiencing the same development or the other economy has achieved the preferred or final stage of development (The World Bank, 2006).
The WB was repeatedly relied upon by impoverished governments around the world as a contributor of development finance as the key institution which the channels economic support and resources of developed countries to poor nations (Miller-Adams, 1999). It provides long term loans, grants, and technical assistance, to help developing countries implement their poverty reduction strategies. These financial provisions are usually utilized for health and education reforms, environmental and infrastructure projects, including dams, roads, and national parks. In general, WB helps governments of developing countries to fight poverty and to improve the living standards of the people.
Meanwhile, the IMF was tasked to promote international monetary cooperation, facilitate expansion and balanced growth of international trade, maintain exchange stability, assist in establishing multilateral systems of payments, and act as safeguard to member countries with problematic balance of payments. Generally, the IMF minimizes the degree of disequilibrium in the international balance of payments among member countries to facilitate global trade practices and free capital movement (Fieleke, 1994).
Influence and Impacts of the Terms and Conditions of the World Bank (WB) and the International Monetary Fund (IMF) to the Sovereignty of the State of Developing Countries
Globalization of both the economy and the society has confronted the world over the past decade (Kim & Weaver, 2000; Ohmae, 1990; Naisbitt & Aburdene, 1990). Among the important contributors to world confederacy and the global economy are the advances in computerization, telecommunications, and other forms of information technology. A shift of focus and interest from the local market to the international setting has demanded innovation not just in corporate leadership as new information, forms of communication, and technology. These are being offered to be utilized in encouraging and reinforcing interaction among individuals and the operating enterprise.
Since globalization represents the shift of the main venue of capital accumulation from the national to the supranational or global level (Teeple, 2000) and due to the adverse effects of such phenomenon, international businesses plan to venture into new horizons catering to the needs of the new markets and countries. Over the past half century, the developing countries have grappled with their relationship to the world trading system, the role of their trade policies in their economic growth, and the influence of the world economy on their prospects for growth (Krueger, 1995). The eventual recognition of the developing states and their contribution to the world economy enable firms to expand and apply their operations to such countries.
Along with the encompassing responsibilities and influence of the WB and the IMF are the issues on preservation of state sovereignty among their member countries. The international laws that serve as guidelines and control of the activities of the WB and the IMF have been widely criticized for restricting and controlling individual state power and economic governance among developing countries that receive financial aids from the mentioned international financing institutions. Political analysts have been citing cases of state sovereignty infringement by the WB and the IMF particularly when economic provisions and conditions of these organizations are in conflict of interest with a developing country’s national economic policy. Since developing countries are in debt with the financial aids and loans, complete and full enactment as well as observation of local policies is undermined in order to submit to the terms presented by the WB and the IMF.
State sovereignty is classically defined as being characterized with (1) the state’s supremacy over domestic matters, (2) state’s exclusive right to regulate its territory and its citizens, and (3) state’s right to guide its internal and external affairs without foreign interference (Marti-Martinez, 1996). Moreover, sovereignty “is the power that… enables entire body politic to exercise some control over its destiny” (Cahn, 1993, pp. 150-167). Tsai (2000) emphasized further the concept of sovereignty by contextualizing it under the aspects of defensive and affirmative distinctions. Accordingly, “defensive sovereignty is the state’s inalienable right to avoid being adversely affected by decisions and events happening outside its jurisdiction while affirmative sovereignty is the state’s right to determine its own policies and developmental course” (Tsai, 2000, p. 1317). The definitions address common theoretical notion of the absolute nature of state sovereignty.
The relationships between the WB/IMF and the developing countries which they assist financially are governed with terms of conditionality or “the linking of the disbursement of a loan to understandings concerning the economic policy which the government of the borrower country intends to pursue” (Mosely, 1992, p. 129). Under this conditional finance relationship, the WB/IMF have the right to independently examine a debtor country’s need of financial assistance and the prerogative to require adoption of some recommended economic policies amendments of the state before issuing the requested development aid (Swaminathan, 1998). Both WB and IMF decide the credit limits provided to a country’s domestic bank, decrease in the fiscal deficit, exchange rate depreciation as well as trade liberalization policies (Taylor, 1987). Most of the time, the conditionality policies of the WB and the IMF exceeds the macroeconomic recommendations for the country and through time, such practice has evolved into detailed economic reforms for the debtor which affects domestic governance of the assisted country resulting governance issues (Shihata, 1991).
Initiated Economic Reforms of the World Bank (WB) and International Monetary Fund (IMF) Loan Assistances
The WB and the IMF have always collaborating in initiating joint activities to alleviate the poor living conditions of the people living below poverty level among developing countries. Aside from projects and funding as well as loan allowances and assistance provided by these organizations, the WB and the IMF likewise offer technical assistance and surveillance to Third World countries.
In the 1990’s the WB and the IMF launched Heavily Indebted Poor Countries (HIPC) initiative to decrease the burden of developing countries concerning external debts to international financing institutions, organizations and developed countries. The guidelines and policies enacted by both organizations have been purposely conceptualized to link national policies, donor support, and development outcomes needed to reduce poverty in low-income countries through concessional lending and loan assistances of both organizations. These developmental projects and financial loans were monitored in order to determine and assess the result of the aid initiated by both organizations. Other evaluation procedures include the review of economic policies among developing countries and recommending corrective reforms to support the progressive objectives of WB and IMF. Aside from developmental activities and projects, the WB and the IMF are also working together to make their member countries financial sectors well-regulated by identifying the strengths and risks of a particular country’s financial system and economic policies (http://www.imf.org/external/about.htm).
The WB and the IMF serve 30 countries in Latin America and the Caribbean (LAC), where average per capita income is about $3,600 a year. LAC is a region of staggering diversity, with 525 million people who speak Spanish, Portuguese, English, French and some 400 indigenous languages. Specifically, the organizations launched its new Country Assistance Strategy (CAS) for Argentina, which will guide the Bank Group’s program in the country from April 2004 through December 2005. The new CAS provides for US$2 billion in new financing for Argentina in support of country efforts to achieve sustained economic growth with equity, social inclusion, and improved governance. The WB and the IMF likewise support the efforts of the countries in the region committed to a reform agenda designed to create more efficient and effective government in the interests of development. Following Sub-Saharan Africa, South Asia is the largest regional recipient of concessional lending that provides interest-free loans to the world's poorest countries (http://www.worldbank.org/). However, aside from the contributions cited above by the WB and the IMF, both organizations were criticized for some loan assistances and developmen0t projects which did not prove successful or beneficial to the civil society of the domestic countries which they granted loans.
In 1974, the Bank failed to adequately consider the social environmental factors that are detrimental to the 1974 Indonesian Transmigration program. The project was the largest resettlement program ever attempted constituting the transfer of 65 million Indonesians in Java, Madura, and Lombok to the country’s outer islands in a span of twenty years in order to foster manpower delegation and unity through ethnic integration as well as to improve the living standards of the people being confronted with unemployment and other socio-economic problems. Unfortunately, the new settlements went out of control as the local populations protested against the migrators devastating the life of the tropical forest and killing the indigenous folks. The project was likewise criticized for the inhospitable resettlement sites (Le Prestre, 1989). Having realized such mistakes, the Bank enacted Safeguard Policies for its future development projects covering environmental assessment, natural habitats, forests, pest management, cultural property, involuntary resettlement, indigenous peoples, safety of dams, disputed areas, and international waterways (The World Bank, 2006).
The IMF likewise was confronted with criticisms and confrontations regarding the failed projects and economic reforms initiated by the organization. In 2001, Argentina underwent economic crisis which was blamed to the economic reforms proposed by IMF in terms of the budget restrictions and privatization plans induced by the Fund. It was believed that the planned economic reforms for Argentina failed as the country experienced inability to sustain health, education, security and infrastructure building and incorrect privatization of relevant government resources (Engdahl, 2004). In the case of Kenya, the structural adjustment program by IMF to the country’s currency movement which was which was handled by Kenya’s central bank resulted to lower foreign investment and proliferated the case of Goldenberg scandal regarding the corruption of the country’s government officials (Wikipedia, 2006).
Issues of Corruption on the Economies of Developing Countries
Developing countries are most of the time confronted with issues on economic and sociological instability. But aside from the economic and social problems that beset these countries, political constraints play a primary role and dictate most significantly the pace of growth and development among Third World countries. Self-vested interest among both the public officials as well as the private individuals in the form of unethical criminal collaboration that directly affects the welfare and social condition of the general public constitutes the serious hindrance to the competitiveness of the domestic state. According to Rosenau and Wang (2001) corruption involves the collaboration of public and private officials for private financial gains in contravention of the public’s interest. Corruption ranges widely from small bribes to low-level bureaucrats to distortions of large procurements and major policy decisions (Elliot, 1997).
Rose-Ackerman (1997) presented situations which indicate who obtains the benefits and bears the cost of political, judicial, and bureaucratic acts of corruption. The study provided six broad and overlapping categories that capture the most significant situations. First, the government may be charged by allocating a scarce benefit to many individuals and firms using legal criteria like bribes other than willingness to pay. Second, officials in the public sector may have little incentives to do their jobs well given the official pay scales and the level of internal monitoring in which bribes serve as incentive bonuses. Third, private firms and individuals seek to reduce the costs imposed on them by the government in the form of taxes, customs duties, and regulations wherein bribes are offered to lower costs. Fourth, when governments frequently transfer large financial benefits to private firms through procurement contracts, privatizations, and the award of concessions, bribes divide the monopoly rents between the private investors and public officials. Fifth, bribes are used as alternatives to gain legal political influence like votes among the public. And lastly, bribes can override legal norms since the judiciary has the power to impose costs and transfer resources between litigants (Rose-Ackerman, 1997).
Several studies and critical examination of the function of corruption to the low level of growth and development among Third World countries have been presented. Studies which focused on the socio-political impact of corruption claimed that strong legal and government institutions as well as low levels of corruption benefit the economic growth of the nation (Mauro, 1995). Measures of bureaucratic efficiency like the level of red tape and quality of the judiciary are found to be highly correlated with the corruption indices indicating further that corruption is a function of the level of red tape and almost vice-versa. Moreover, corruption results to other social, economic and political problems among developing nation-states (Mauro, 1997). In the case of the East Asian countries’ problems on foreign direct investment, corruption was indicated as the most significant determinant of business initiators in the developing countries (Wei, 1997).
Nigeria is one of the countries in Africa that needs support from civil society groups. With more than 250 ethnic groups in its population, the country experienced dictatorship in the seventies, and today, it seems that corruption in the government stands out as Nigeria’s most daunting and deliberating problem (Onwudiwe, 2004). Nigeria is not a poor country, so to speak, as it has many supplies of oil. However, despite of this wealth, which gained it the title of being the 6th oil-producing nation of the world, the poor constitute about 70% of the Nigerian population (Dike, 2001). The Dike (1999) stated that social division and mismanagement have paralyzed the opportunity of Nigeria to alleviate its people from poverty. However, it seems that corruption is the main reason for its condition and if it will not be stopped, the Nigerian people will suffer more – economically, physically, mentally, and emotionally.
In this light, the WB and the IMF consider the level of corruption among developing countries that are asking for economic aid. Both organizations are concerned with the allocation of resources that developing countries will initiate particularly when corruption is rampant in the domestic government. Moreover, the purpose of the organizations are undermined particularly their aggressive promotion on international economic competitiveness of developing countries. In effect, corruption cases and levels of political chaos in developing countries serve as factors that both the WB and the IMF take into account before approving economic assistance to Third World countries were level of corruption has been indicated critical.
The World Bank (WB) and the International Monetary Fund (IMF) Measures of Decreasing Corruption in Developing Countries
Having realized the impact of corruption on the fast development and growth among developing countries, international organizations have been conscious of conceptualizing means and measures to decrease levels of corruption in different Third World countries in the hope of completely eliminating such crimes so as to foster political, social and economic stability. A number of international conferences and agreements have been instituted and founded to reinforce and administer the impact of corruption in developing countries that are detrimental to the overall economic functioning of the international market.
Consequent upon this the new perception is how the developed nations would increase aid to the developing nations by way of channeling these funds to the grassroots through NGOs instead of governments, and which has always been the New Policy Agenda of the international system. Under this new agenda international system emphasizes development through the grassroots, rather than development from above and NGOs are situated to simultaneously address the twin pillars of development – economic and political liberalization (Fisher, 1997). Aid is viewed as a means of promoting donors perceptions of ‘good governance’ and ‘sound’ economic practices, leading many analysts and politicians to become very critical of aid (Desai and Potter, 2002).
The International Anti-Corruption Conference (IACC) which was founded in 1983 originated from an international forum of international law enforcement that have serious in combating corruption is a perfect example of international organizations growing concern on the impact of corruption. The IACC is significantly concerned with corruption at national and international levels in all sectors encouraging participation and cooperation of citizens to fight corruption (Transparency International, 1998). The encompassing responsibility of the WB and the IMF motivated the organizations to participate and contribute to the fight against corruption. James Wolfensohn concerned the WB to make prevention of corruption a foundation of policy-making in terms of the assistances offered by the Bank (Brademas & Heimann, 1998; Hughes, 1998). The year 1997 was significant in the Bank’s campaign against corruption by producing an anticorruption initiative to lay guidelines for the granting of financial aids to developing countries (Royle, 1997).
The World Bank (WB) and the International Monetary Fund (IMF) Economic Assistance to Jordan’s Privatization of Sectors
In the collective action and synergy that the concept promises to the people, the government and the policy makers should be in the position to handle problematic situations that the citizens will likely address and demand for immediate solution. A clash between public institutions as well as the involvement of the private and economic sectors is worthy to be given consideration on issues that will post conflict among these parties. But what is important in the utilization and exhausting the possibilities of this concept is the fact that highly relevant public issues will be recognized and awareness between the different sectors of the society will be uphold.
According to the World Bank’s World Development Indicators (2004), Jordan has a population of 5 million and per capita GNP which is higher that the average among lower-middle-income countries but less than the average for the countries belonging in the Middle East and African regions. The country is greatly dependent to its neighboring countries primarily because of its (1) overseas domestic workers in the Gulf States contributing 15-20% of the total national income; (2) export goods and import needs of the country are provided by its partner countries in the region, and (3) neighboring countries in the region support Jordan through financial aids. Yet these international partnerships likewise contributed to Jordan’s economic crisis fueled by the falling oil pries in the 1980’s in which the country resorted to external borrowing. However, structural weakness in the country’s financial system as well as balance of payment necessitated the intervention of the IMF in 1989 to facilitate the international financial relations of the country and uphold economic growth (Independent Evaluation Office, 2004).
After 15 years of assistance from the IMF, the domestic government decided to part ways with the Fund and extended its development efforts independently in 2004 while under the post program monitoring and technical assistance from the organization (International Monetary Find, 2004). The Jordan-IMF relations were grounded under the main objectives of improving the living standards of the people and increased opportunities for employment along with goals to increase real GDP growth, lower inflation rate, and empowering the external and fiscal positions of the country for overall competitiveness. These economic reform plans were made possible by increasing domestic savings and investment, comprehensive structural reforms in the government budget, financial sector, trade liberalization, regulatory framework, public enterprises as well as privatization programs. Realizations of these programs were instituted in the Jordan’s Plan for Social and Economic Transformation (PSET) (Independent Evaluation Office, 2004).
In the attempt to attract foreign direct investment in the country as well as in order to expand the private sector, the government supported privatization efforts in the locale promoting entrepreneurship by reforming corporate governance in the country. Bi-lateral trade agreements and portfolio investments were encouraged to integrate the country to the world economic activities. As a result, Jordan ranked averagely with OECD countries at the start of the program, fared better during the enactment procedures of the plan as well as in the entire reinforcement of the contract. Such success called for further integration of the country to the international economy as guided by the regional viability of the plans. Moreover, the Free Zone Corporation which is an independent arm of the government administered the establishment of free zones in the country while providing services to the investors including “a twelve-year exemption from income and social services taxes; salaries and allowances to non-Jordanian employees; free transfer to invested goods in the free zones, including profits; no exchange control limitations; enhancing the role of the private sector in the economy; and protection of foreign investments from nationalization” (United Nations Development Programme, 2006).
Comparison of Successful and Failed Loan Assistances of the World Bank (WB) and the International Monetary Fund (IMF) to African Countries
As of March 2004, the World Bank had approved a total of 30 IDA credits for the Central African Republic for approximately US$465.47 million. Particularly in Central African Republic wherein the World Bank’s Board of Executive Directors discussed a Regional Integration Assistance Strategy aimed at improving trade links and enhancing the economic integration of six Central African countries. The strategy will support the Central African Economic and Monetary Community (CEMAC) to improve trade links between its member countries—Cameroon, the Central African Republic, Chad, the Republic of Congo, Equatorial Guinea, and Gabon. It will do so by planning to build new roads and improve existing ones, modernize and integrate the financial sector, and by speeding up transaction time at the ports and customs. This will facilitate the movement of goods, people, and capital and reduce transaction costs (http://www.worldbank.org/).
In Kenya, the International Finance Corporation invested in Magadi Soda as an affiliate of the WB and the IMF to promote economic development in the African region. Magadi Soda is a supplier of soda ash used mainly for glass manufacturing which was assisted since 1996 by the WB to be competitive in the international market since demand for the product emerged internationally. Since the investment proved successful following the initial allocation provided, additional grants were made to expand the local business through product quality upgrading, increasing environmental standards, and enlarged production capacity. It is hoped that the business will contribute to the country’s foreign export revenues. Due to new forms of renewable raw material source in the locality, the business contributed to increased economic activity in the remote parts of Kenya providing employment and other economic s to the people of Maasai. Magadi Soda has demonstrated a strong commitment to the community by providing housing, schooling, hospital services, and drinking water for local people earning Corporate Citizenship Award from the Kenya Institute of Management for displaying social responsibility and sensitivity to the community’s needs. The company and IFC are also helping the local community establish a development plan to diversify its economic base, including through supply contracts with Magadi Soda (International finance Corporation, 2004).
The 2002 famine in Malawi however, is blamed to the economic development and reforms initiated by the WB and the IMF. The European Union (EU) pressure to Malawi’s domestic government to lower the country’s grain reserves was supported by both the WB and the IMF to pay for a $3000 million loan to a South African government resulted to decreased revenues among the farmers and eventual food shortage in the country. The initiated economic reform strategy recommended by both the IMF and the WB caused a drop in the local prices of the grains thereby reducing the capacity of the farmers to produce for the next planting season as well as smaller drought reserves. As such, deaths of countless individuals were made liable to the lack of local economic environment considerations of both institutions. The economic issues and social problems as well as criticisms fueled by the famine were pointed to the WB and the IMF along with similar cases in other countries such as Nigeria and Ethiopia. Other agricultural reforms fostered by the WB and the IMF were disapproved by the other countries in the region as a result of the famine (Engler, 2005).
Developing Countries’ Hope to Cancel their Loans
Many developing countries have very large debts, and the amount of money they owe is quickly increasing. Trying to pay off the debt has become a serious problem for these countries, and it causes great hardship for their people. Moran (2001) states that heavily indebted countries are fast recovering from an era when attempts of paying off foreign produced a social setback greater than the Great Depression tracing the root of the crisis from (1) the involvement of public and private borrowers, and commercial banks in funding many dubious projects in the late 1970s; (2) the steep rise in US interest rates from 9 percent to 19 percent in the period 1978-81; and (3) the recession in the developed countries and the consequent collapse of commodity prices which left both LDC borrowers and bank creditors unexpectedly overextended.
Moran (2001) further discusses the concept of debt relief for the borrowers from Third World countries. The Brady Plan paved the way for the possibility of relief on debt. In 1990, it was expanded to include the possibility of relief on debt owed to governments as well as commercial banks. But after a series of negotiations with voluntary participations by the banks, it turned out that the magnitude of the relief was quite small. Accordingly, the Brady Plan shifts the burden for turning around the Third World economies to the solving the debt problem via the expansion of trade, through the results of the Uruguay Round of multilateral trade negotiations. Initiatives in this Round are highly sensitive for the Third World economies since the Uruguay Round would have to be a major triumph to tackle the Third World debt crisis. As such, the success of the Uruguay Round of trade negotiations is favorable to diverse issues like improving trade efficiency and expanding the range of comparative advantage, and in bolstering political stability for countries still struggling with the debt crisis. However, development of new visions of mutually beneficial economic engagements that is persuasive enough to overcome short-sighted opposition to concessions on trade and debt should be realized (Morgan, 2001).
One of the greatest effort in addressing the problem of Third World crisis was the Jubilee 2000 campaign which aimed at canceling debt Third World governments owe the IMF and private banks by the year 2000. The launching of Jubilee 2000 gave the heavily indebted countries hope in curbing the debt crisis. Holtzman (1999) provides an overview of the issues of debt relief, especially in lieu of this campaign. The campaign was inspired by the book of Leviticus, and was advocated by the Pope, various international artists, business organizations, and other groups advocating debt relief. The IMF and the WB were even moved by the campaign. However, according to Holtzman (1999), many Jubilee 2000 leaders believe that the 1996 creation of Heavily Indebted Poor Countries (HPIC) by the IMF and the WB may have been a preemptive strike against the effort for wiping the slate clean. Here, a country is only provided relief if it implements IMF and WB’s economic restructuring programs which have forced borrowing from speculative financial markets.
Michael (2001) examines the difference the Jubilee 2000 campaign has made for the Third World countries calling for a direct action to stop the cycle of debt crisis that cripples Third World economies. This crisis has continued even after the Jubilee 2000. Accordingly, although poor countries were greatly benefited by the debt reduction, they were not freed from multilateral control. As debt relief programs are subject to IMF and World Bank approval, poor countries still must adopt sound economic policies that are imposed by these institutions. Creditors set the conditions for reducing debt payments and principal, just as they set the conditions for granting new loans.
Michael (2001) finds that the goals of Jubilee 2000 were not achieved. Michael quotes Ann Pettifor, director of Jubilee 2000/UK, "The bulk of the unpayable debts are still in place. We have yet to achieve real justice for a billion people." Although a failure, Michael (2001) considers the campaign significant because it has educated millions of people about the harsh reality Third World debt crisis, and it has helped to galvanize a movement worldwide. According to Michael (2001), the movement must also focus on the conditions attached to both loans and relief, which continue to inflict an enormous toll on the poor.
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