PHA-Exchange> 2002 HAZARDOUS TO HEALTH: THE WORLD BANK AND IMF IN AFRICA

[Aviva]

From: Firoze Manji <firoze at fahamu.org>

> Action Position Paper by Ann-Louise Colgan, Research Associate, Africa
Action, April, 2002.

> Health is a fundamental human right. Health is also an essential component
of development, vital to a nation's growth and internal stability. Over the
past two
> decades, the World Bank and IMF have undermined Africa's health through
the policies they have imposed. The dependence of poor and highly indebted
African countries on World Bank and IMF loans has given these institutions
leverage to control economic policy-making in these countries. The policies
mandated by the World Bank
> and IMF have forced African governments to orient their economies towards
> greater integration in international markets at the expense of social
services and long-term development priorities. They have reduced the role of
the state and cut back government expenditure.
 While many African countries succeeded in improving their health care
> systems in the first decades after independence, the intervention of the
> World Bank and IMF reversed this progress. Investments in health care by
> African governments in the 1970s achieved improvements in key health
> indicators. In Kenya, for example, child mortality was reduced by almost
50%
> in the first two decades after independence in 1963. Across sub-Saharan
> Africa, the first decades after independence saw significant increases in
> life expectancy, from an average of 44 years to more than 50 years.
> In the 1980s and 1990s, however, African governments had to cede control
> over their economic decision-making in order to qualify for World Bank and
> IMF loans. The conditions attached to these loans undid much of the
progress
> achieved in public health. The policies dictated by the World Bank and IMF
> exacerbated poverty, providing fertile ground for the spread of HIV/AIDS
and
> other infectious diseases. Cutbacks in health budgets and privatization of
> health services eroded previous advances in health care and weakened the
> capacity of African governments to cope with the growing health crisis.
> Consequently, during the past two decades the life expectancy of Africans
> has dropped by 15 years.
>
> Africa Action calls for an end to World Bank and IMF policies that
undermine
> health. This requires canceling the debts that prevent African governments
> from making their full contribution to addressing the health crisis. It
also
> requires ending the imposition of harmful economic policies as conditions
> for future loans or grants.
>
> 1.  In 1944,  The World Bank and IMF were  were designed as pillars of the
post-war global economic order. The World Bank's focus is the provision of
long-term loans to support development projects and programs. The IMF
concentrates on providing loans to stabilize countries with short- term
financial crises. The World Bank and IMF became
> increasingly powerful in Africa with the economic crisis of the early
1980s.
> In the late 1970s, rising oil prices, rising interest rates, and falling
prices for other primary commodities left many poor African countries unable
to repay mounting foreign debts. In the early 1980s, Africa's debt crisis
worsened. The ratio of its foreign debt to its export income grew to 500%.
African countries needed increasing amounts of "hard currency" to repay
their external debts (i.e. convertible foreign currencies such as dollars
and deutschmarks). But their share of world trade was decreasing and their
export earnings dropped as global prices for primary commodities fell. The
reliance of many African countries on imports of manufactured goods, which
they themselves did not
> produce, left them importing more while they exported less. Their balance
of
> payments problems worsened and their foreign debt burdens became
> unsustainable.
 African governments needed new loans to pay their outstanding debts and to
> meet critical domestic needs. The World Bank and IMF became key providers
of
> loans to countries that were unable to borrow elsewhere. They took over
from
>  private banks as the main source of loans for poor countries. These
institutions provided "hard currency" loans to African countries to insure
repayment of their external debts and to restore economic stability. The
World Bank and IMF were important instruments of Western powers during the
Cold War in both economic and political terms.
> They performed a political function by subordinating development
objectives
> to geostrategic interests. They also promoted an economic agenda that
sought
> to preserve Western dominance in the global economy. Not surprisingly, the
> World Bank and IMF are directed by the governments of the world's richest
> countries. Combined, the "Group of 7" (U.S., Britain, Canada, France,
> Germany, Italy and Japan) hold more than 40% of the votes on the Boards of
Directors of these institutions. The U.S. alone accounts for almost 20%. It
was U.S. policy
> during the Reagan Administration in the early 1980s, to expand the role of
the World Bank and IMF in managing developing economies. The dependence of
African countries on new loans gave the World Bank and IMF great leverage.
The conditions attached to these loans required African countries to submit
to economic changes that favored "free
> markets." This standard policy package imposed by the World Bank and IMF
was
> termed "structural adjustment." This referred to the purpose of correcting
> trade imbalances and government deficits. It involved cutting back the
role
> of the state and promoting the role of the private sector. The ideology
> behind these policies is often labeled "neo-liberalism," "free market
> fundamentalism,"or the "Washington Consensus." From the 1970s on, this
> orientation became the dominant economic paradigm for rich country
> governments and for the international financial institutions. The basic
> assumption behind structural adjustment was that an increased role for the
> market would bring benefits to both poor and rich.  This would encourage
> others to follow their example. The development of a market economy with a
> greater role for the private sector was therefore seen as the key to
> stimulating economic growth. The crisis experienced by African countries
in
> the early 1980s did expose the need for economic adjustments. With
declining
> incomes and rising expenses, African economies were becoming badly
> distorted. Corrective reforms became increasingly necessary. The key issue
> with adjustments of this kind, however, is whether they build the capacity
> to recover and whether they promote long- term development. The
adjustments
> dictated by the World Bank and IMF did neither.
>
> African countries require essential investments in health, education and
> infrastructure before they can compete internationally. The World Bank and
> IMF instead required countries to reduce state support and protection for
> social and economic sectors. They insisted on pushing weak African
economies
> into markets where they were unable to compete with the might of the
> international private sector. These policies further undermined the
economic
> development of African countries.

Structural adjustment refers to a package of economic policy changes
designed to fix imbalances in trade and government budgets.
> In trade, the objective is to improve a country's balance of payments, by
> increasing exports and reducing imports. For budgets, the objective is to
> increase government income and to reduce expenses. In theory, achieving
> these goals will enable a country to recover macroeconomic stability in
the
> short-term. It will also set the stage for long-term growth and
development.
> The structural adjustment programs of the early 1980s were meant to
provide
> temporary financing to borrowing countries to stabilize their economies.
> These loans were intended to enable governments to repay their debts,
reduce
> deficits in spending, and close the gap between imports and exports.
> Gradually, these loans evolved into a core set of economic policy changes
> required by the World Bank and IMF. They were designed to further
integrate
> African countries into the global economy, to strengthen the role of the
> international private sector, and to encourage growth through trade.
Typical
> components of adjustment programs included cutbacks in government
spending,
> privatization of government-held enterprises and services, and reduced
> protection for domestic industry. Other types of adjustment involved
> currency devaluation, increased interest rates, and the elimination of
food
> subsidies. The underlying intention was to minimize the role of the state.
>
> World Bank and IMF adjustment programs differ according to the role of
each
> institution. In general, IMF loan conditions focus on monetary and fiscal
> issues. They emphasize programs to address inflation and balance of
payments
> problems, often requiring specific levels of cutbacks in total government
> spending. The adjustment programs of the World Bank are wider in scope,
with
> a more long-term development focus. They highlight market liberalization
and
> public sector reforms, seen as promoting growth through expanding exports,
> particularly of cash crops. Despite these differences, World Bank and IMF
> adjustment programs reinforce each other. Governments generally must first
be
> approved by the IMF, before qualifying for an adjustment loan from the
World
> Bank. Their agendas also overlap in the financial sector in particular.
Both
> work to impose fiscal austerity and to eliminate subsidies for workers,
for
> example. The market-oriented perspective of both institutions makes their
> policy prescriptions complementary.
>
> Adjustment lending constitutes 100% of IMF loans. In 2001, approximately
27%
> of World Bank lending to African countries was for "adjustment." In the
> World Bank's total loan portfolio, adjustment lending generally accounts
for
> between one-third and one-half. The remainder of World Bank loans are
> disbursed for development projects and programs. The project portfolio of
> the Bank covers such areas as infrastructure, agricultural and
environmental
> development, and human resource development. In some cases, the projects
> supported by World Bank loans do make useful contributions to development.
> But these occasional successes must be weighed against the negative
effects
> of increasing debt, imposed economic policies and their consequences. The
> past two decades of World Bank and IMF structural adjustment in Africa
have
> led to greater social and economic deprivation, and an increased
dependence
> of African countries on external loans. The failure of structural
adjustment
> has been so dramatic that some critics of the World Bank and IMF argue
that
> the policies imposed on African countries were never intended to promote
> development. On the contrary, they claim that their intention was to keep
> these countries economically weak and dependent. The most industrialized
> countries in the world have actually developed under conditions opposite
to
> those imposed by the World Bank and IMF on African governments. The U.S.
and
> the countries of Western Europe accorded a central role to the state in
> economic activity, and practiced strong protectionism, with subsidies for
> domestic industries. Under World Bank and IMF programs, African countries
> have been forced to cut back or abandon the very provisions which helped
> rich countries to grow and prosper in the past. Even more significantly,
the
> policies of the World Bank and IMF have impeded Africa's development by
> undermining Africa's health. Their free market perspective has failed to
> consider health an integral component of an economic growth and human
> development strategy. Instead, the policies of these institutions have
> caused a deterioration in health and in health care services across the
> African continent.
>
>  Health status is influenced by socioeconomic factors as well as by the
state of health care delivery systems. The policies prescribed by the World
Bank and IMF have increased poverty in African countries and mandated
cutbacks in the health sector. Combined, this has caused a massive
deterioration in the continent's health status.
>
> The health care systems inherited by most African states after the
colonial
> era were unevenly weighted toward privileged elites and urban centers. In
> the 1960s and 1970s, substantial progress was made in improving the reach
of
> health care services in many African countries. Most African governments
> increased spending on the health sector during this period. They
endeavored
> to extend primary health care and to emphasize the development of a public
> health system to redress the inequalities of the colonial era. The World
> Health Organization (WHO) emphasized the importance of primary healthcare
at
> the historic Alma Ata Conference in 1978. The Declaration of Alma Ata
> focused on a community-based approach to health care and resolved that
> comprehensive health care was a basic right and a responsibility of
> government. These efforts undertaken by African governments after
> independence were quite successful. There were increases in the numbers of
> health professionals employed in the public sector, and improvements in
> health care infrastructure in many countries. There was also some success
in
> extending care to formerly unserved areas and populations. Across the
> continent, there were improvements in key health care indicators, such as
> infant mortality rates and life expectancy.  The number of doctors and
nurses was also significantly increased during this time. Infant mortality
was reduced.
While progress across the Africa was uneven, it was significant, not only
because of its
> positive effects on the health of African populations. It also illustrated
a
> commitment by African leaders to the principle of building and developing
> their health care systems.
>
As African governments became clients of the World Bank and IMF, they
forfeited control
> over their domestic spending priorities. The loan conditions of these
> institutions forced contraction in government spending on health and other
> social services. Poverty and Health The relationship between poverty and
> ill-health is well established. The economic austerity policies attached
to
> World Bank and IMF loans led to intensified poverty in many African
> countries in the 1980s and 1990s. This increased the vulnerability of
> African populations to the spread of diseases and to other health
problems.
> The public sector job losses and wage cuts associated with World Bank and
> IMF programs increased hardship in many African countries. During the
1980s,
> when most African countries came under World Bank and IMF tutelage, per
> capita income declined significantly  most of sub- Saharan Africa. The
removal of food and agricultural subsidies caused prices to rise and created
increased food insecurity. This led to a marked deterioration in nutritional
status, especially among women and children.  Malnutrition resulted in low
birth weights among infants and stunted growth
> among children in many countries. It is currently estimated that one in
> every three children in Africa is underweight. In general, between one-
> quarter and one-third of the population of sub-Saharan Africa is
chronically
> malnourished. The deepening poverty across the continent has created
fertile
> ground for the spread of infectious diseases. Declining living conditions
> and reduced access to basic services have led to decreased health status.
In
> Africa today, almost half of the population lacks access to safe water and
> adequate sanitation services. As immune systems have become weakened,
> the susceptibility of Africa's people to infectious diseases has greatly
> increased. A joint release issued by WHO and the Joint UN Programme on
> HIV/AIDS (UNAIDS) in April 2001 reports that the number of cases of
> tuberculosis in Africa will reach 3.3 million per year by 2005.  WHO
> reported in 2001 that almost 3,000 Africans die each day of malaria. Each
> year in Africa, the disease takes the lives of more than 500,000 children
> below the age of five. Most devastating of all has been the impact of
> the HIV/ AIDS pandemic. The spread of HIV/AIDS in Africa has been
> facilitated by worsening poverty and by the conditions of inequality
> intensified by World Bank and IMF policies. Economic insecurity has
> reinforced migrant labor patterns, which in turn have increased the risk
of
> infection. Reduced access to health care services has increased the spread
> of sexually transmitted diseases and the vulnerability to HIV infection.
> Further details:
> http://www.equinetafrica.org/newsletter/newsletter.php?id=634
> Edit:
>
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