It was one of the finest moments in Bangladesh’s history when it stood up and said thank-you to the World Bank and went ahead on its own with its signature infrastructure project, the Padma Bridge. That was the proudest moment for a country once termed an ‘international basket case’, writes Anis Chowdhury
THE World Bank which made a lot of fuss with the Padma Bridge financing now comes back with an offer of a loan of $2 billion to Bangladesh as climate finance over the next three years. Is it the World Bank’s expiation for the Padma Bridge fiasco?
The Transparency International, Bangladesh has voiced concerns and called on the government not to accept any loan. I fully support the TIB’s position. If Bangladesh could say no to the bank four years ago, it can certainly say no again.
At the time of the Padma Bridge loan fiasco, I wrote in this column that Bangladesh did not need foreign money (‘Why need foreign money for the Padma Bridge?’ New Age, February 25, 2012). I followed up my argument against foreign aid, also in this column, when the finance minister was blaming foreign aid for government failures (‘Whither foreign aid’, New Age, August 31, 2013)
Can a lending agency, be it the World Bank or the International Monetary Fund, be generous? The simple answer is ‘no’. They are there to make money; they have a vested interest in poverty, misfortunes and crisis — the ideal conditions for them for lending and making money. Every crisis, including the recent global financial crisis of 2008–2009, revitalised the World Bank and the IMF. Both the institutions were recapitalised at the G20’s 2009 London Summit; the GFC saved the IMF from its own financial crisis.
Development partnership is a mere cloak to hide these financial institutions’ real intention. Their governance structure is dominated by the rich countries; it is clear whose interest these institutions serve. In a number of columns in this daily, I have written about costs and benefits of the IMF/World Bank loans as well as the credibility of their advice (New Age, January 25, 2012; February 4, 2012 and April 9, 2012).
The real intention of the World Bank and the IMF has been nakedly revealed at the recent annual meetings held in Washington DC in October 7–9, 2016. This year’s annual meetings took place against the backdrop of continued sluggish growth in developed and developing countries. While the IMF warns that both private and public debt levels remain dangerously high, the main response of the Bretton Woods Institutions is new lending facilities that create new debts!
In the aftermath of the global financial crisis, the impact of collapsing commodity prices and sluggish export growth is increasingly felt by the developing countries. Many of the world’s poorest countries have suffered massive revenue losses that increased their borrowing needs. But declining or stagnant export earnings also mean that their capacity to sustain current debt levels has been reduced.
IMF managing director Christine Lagarde announced at the annual meetings that interest rates on concessional lending will continue to be set at zero for as long as and whenever global interest rates are low. But how long will the low interest rate environment remain?
All signs are pointing to an imminent interest rate rise with the US recovery gaining traction. The US Federal Reserve has already made its intention known to shift its unusually expansionary monetary policy gears. Even though the Federal Reserve left its policy interest rate unchanged at its latest meeting (September 2016), ‘Members generally agreed that the case for anincrease in the policy rate had strengthened.’
Thus, many are predicting a re-run of the debt crisis of the 1980s, precipitated by sudden and sharp rises in the US interest rate. Sustaining current private and public debt levels would become particularly difficult when interest rates start to rise. One, therefore, wonders whether the International Monetary Fund and the World Bank are setting up a debt trap to benefit as they did during the 1980s debt crisis of the developing countries.
The World Bank Group’s ‘Global Concessional Financing Facility’ is expected to provide $7.5 billion over the next five years — by blending just $1.5 billion in grants with $6 billion in loans — and will consequently add to the debt burden of already distressed countries.
Instead of promoting debt write-downs or restructuring, both the institutions’ responses rely on actions that create more debt. For example, both are aggressively promoting public-private partnerships to leverage more private capital to finance infrastructure through guarantees and other means.
The World Bank has recently signed the ‘Joint Declaration of Aspirations on Actions to Support Infrastructure Investment’ with 10 other multilateral development banks. The objective is to invest a minimum of $350 billion during 2016–18 in infrastructure development, with the aim of attracting and partnering with private investors in particular.
But more partnerships would mean more contingent liabilities for the public as governments would be forced to pick up the loans of the defaulting private partners during any crisis. So far the experiences of PPPs are very poor examples of a true partnership as the governments end up bearing a large part of associated risks (see my column in New Age, August 25, 2016).
It was one of the finest moments in Bangladesh’s history when it stood up and said thank-you to the World Bank and went ahead on its own with its signature infrastructure project, the Padma Bridge. That was the proudest moment for a country once termed an ‘international basket case’ needing endless foreign aid for its survival or a less derogatory ‘test case’ meaning if development succeeds here, it can succeed anywhere.
Within a short span of time, Bangladesh defied the odds. It moved from the status of being at the margin of history to be in the whirlpool of history; from the status of a mere testing site to that of a learning site for other nations struggling to emerge.
Bangladesh should stand tall and proud. It should celebrate its economic sovereignty by bidding thanks to its development partners, in particular saying good-bye to the World Bank and the IMF.
Anis Chowdhury is a former professor of economics, University of Western Sydney, Australia. He has held senior United Nations positions at New York and Bangkok during 2008–2015.
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