World Bank, IMF and the Environment


The World Bank and the International Monetary Fund (IMF) together have more power to influence development in the Third World and Eastern Europe than do any other institutions in the world. The type of development that takes place does, and will continue to change the lives of those that it touches, and to dramatically alter local and global ecosystems. IMF and World Bank practices have too often usurped local development priorities. Historically, short-term vision, obliviousness to local conditions, and failure to consider the longer-term implications for biodiversity, the natural resource base and society itself, have characterized World Bank and IMF policies and lending practices. The consequences have been severe. Much of the Bank's $22 billion annual lending supports projects and pro grams in environmentally sensitive areas, such as energy, agriculture and transport. The record of Bank lending, (and with it, Bank advice and guidance) in these areas has been characterized by needless environmental destruction and missed opportunities for economically more efficient and environmentally more friendly alternatives. After a 1994 internal review found that between 1986 and 1993, 15 per cent of World Bank lending was directed to projects forcibly displacing 2 million people, the Bank closed or canceled 22 of these projects, leaving 632,000 people to their fate. In addition, in FY 1994 the Bank approved 25 projects that will forcibly displace more people than in any other year in the Bank's history- 458,984. In contrast, in 1995 only 14 per cent of the Bank's outstanding loan portfolio was directed towards the Bank-defined sectors of "education" and "population, health and nutrition." Though continuing to offer new loans to projects requiring forced resettlement, the Bank can point to only a handful of projects in which oustees have not experienced a diminished standard of living. All of the resettlement cases cited as successful have been carried out under authoritarian governments. The World Bank has a record of policies and programs that have often destroyed both the environment and the social fabric in country after country it claims to be helping. The Bank has failed spectacularly to achieve its stated goals of poverty reduction and "sustainable development." Furthermore, the World Bank's "environmental" lending often serves as little more than camouflage for other, environmentally destructive projects. The Global Environment Facility (GEF), an international financial mechanism to fund projects intended to benefit the global environment, is largely managed by the World Bank. As such, GEF projects are suffering from the same problems as the Bank's regular lending operations. The IMF continues to focus on narrowly conceived policy measures that aim to correct short-term balance-of payment problems without regard for the long-term impacts of such measures. The IMF lacks the expertise to deal with social and environmental issues and operates within a framework that cannot accommodate the complexities of working with the widely differing economic situations in each country. The IMFs lack of country-specific policies has impeded the long- term stabilization of developing countries' economies, calling into question the political feasibility of IMF structural adjustment programs, and, in general, the Fund's effectiveness in reaching its own economic goals. The IMF's continual disregard for people and the environment in borrowing countries has undermined the very foundations of sustainable development.



Fundamental changes in the goals, structure, operating procedures, policies, and staffing of the World Bank and IMF are essential to sustain the natural wealth on which we all depend. The following positions should guide U.S. taxpayer support of all inter national development aid, and apply especially to the World Bank and the IMF as they are presently structured and operating.

1- The World Bank and IMF should ensure that the practical consequences of their operations are consistent with, and do not undermine the goals of the agreements reached at the 1992 United Nations Conference on Environment and Development held in Rio de Janeiro. In keeping with the global commitments made at the Rio Earth Summit, each relevant World Bank project and program, and each structural adjustment program of the IMF should ensure that it is consistent with protecting biodiversity and climate, and is in line with international environmental agreements, such as the one protecting the ozone layer. The World Bank and IMF should also incorporate into their planning and decision-making processes the value of natural resources and ecosystems to be depleted and/or degraded by policy prescriptions and, in the case of the Bank, the project lending portfolio. For example, natural resource accounting should be incorporated into country programming and loan appraisals.

2- World Bank and IMF projects, programs and policies should be reoriented towards local development priorities, as communities are the most appropriate bodies for developing and monitoring local ecosystems. Recognizing that the world's poorest women and men are forced to exploit natural resources in order to survive, self-reliance must be considered a departure point. In response to pressure to improve access to credit and increase investment in microenterprise, the World Bank has refused to mainstream these efforts into its regular portfolio. Instead, it has created the Consultative Group to Assist the Poorest with a mere $30 million, less than one-tenth of one percent of its overall lending portfolio. Out of the $30 million the World Bank has already spent $250 000 on repealing usury laws which protect women from exploitative money lenders. In addition, the World Bank and IMF should guarantee the full, informed participation of local communities, cooperatives, small businesses, women's and indigenous peoples' organizations, and other non-governmental organizations (NGOs) in the planning and implementation of their own development.

3- The U.S. Congress should reallocate U.S. tax dollars appropriated to international finance institutions, increasing the amount targeted to a diverse selection of bilateral, non governmental and private institutions that have a better record of success through creative and flexible approaches to meeting basic human needs in an environmentally sustainable manner. Diversified investment should encourage creative competition among development-finance institutions which are socially and environmentally responsive, open to informed debate and accountable to both the communities affected and the taxpayer supporters. The United States should actively work with other major donor countries to reinvent international finance institutions so that they support and nurture equitable, self-reliant, participatory and sustainable development. The Congress and the Administration should lead this effort, practicing greater oversight of all publicly funded international institutions.

4- The Global Environment Facility (GEF) should function independently of the World Bank. An official evaluation of the GEF pilot phase has found the GEF to follow a top-down, ineffective approach to dealing with problems related to climate change, biodiversity, international waters and ozone depletion. The World Bank requires that many GEF projects be attached to large regular World Bank loans, which often are at odds with protecting the global environment. Full public access to information on GEF and associated projects, guaranteed participation of NGOs and affected communities during the project cycle, and the establishment of an independent secretariat, as well as an effective monitoring and evaluation mechanism for the GEF, are necessary reforms. Until these reforms are achieved, government contributions to the GEF should be withheld.

5- The IMF should guarantee that its programs do not obstruct the goals of civil society to reach equitable and sustainable development. Therefore, the IMF needs to commit to the following program and policy reforms: (a) required consultation with social and environmental experts for all Fund programs at every stage to ensure that structural adjustment pro grams do not increase hardship on the poor or aggravate environmental destruction; (b) an information policy that will guarantee increased transparency of IMF policy and programs with full public access to information; (c) adjustment of the Articles of Agreement to allow greater participation of government ministries and civil society in program design; and, (d) creation of an independent evaluation unit to review, on a country-by-country basis, the impact of the implementation of IMF-required or -recommended policy prescriptions on poverty, economic development and the natural environment.

6- An immediate moratorium on the preparation of any World Bank project involving forced resettlement for governments that do not have in place policies and legal frameworks that will lead to income restoration for those who will be resettled. No project involving involuntary resettlement should be considered until there is hard evidence that alternatives have been examined, rehabilitation measures have been created in consultation with local communities, and monitoring systems are established that will ensure full compliance with Bank guidelines. Specific measures must be taken which will hold World Bank staff accountable for violations of the Bank's involuntary resettlement policy. In addition, the Bank should comprehensively provide mitigation and restitution to those people forcibly resettled by Bank projects already underway. It is also critical that the Bank, in cooperation with borrowing governments, prepare economic rehabilitation programs for all the populations displaced by World Bank projects since 1980 in violation of the Bank's policy.

7- A moratorium on World Bank funding for large dams until: a) a comprehensive, locally driven river basin management plan is implemented that would guarantee that all appropriate alternatives for flood management, water supply, irrigation and power supply are exhausted before big dams are considered appropriate; b) a comprehensive review is carried out of past Bank lending for large dams, including impacts and performance, and a mechanism established to ensure that its findings are applied to future loan considerations; and, c) all conditions applying to the moratorium of projects involving forced resettlement are met.

8- Substantial shifts in Bank lending towards alter native, cost-effective, resource-conserving energy, transport and water supply and sanitation projects. Water projects should support conservation, demand side management, improved efficiency in irrigation, the re-use of treated waste water, the transfer of "clean" technologies to developing countries, and the extension of basic supply and sanitation coverage to unserved populations. Energy lending should evaluate and support least-cost investments in end-use efficiency, conservation, and renewable energy sources. Investment decisions for transport lending should be based upon meeting basic mobility needs, especially for the poor, efficiently and at the least cost, using a variety of modes of transport. In all sectors, social and environmental costs should be fully integrated into the decision-making process.

9- A major shift in Bank lending away from agricultural export production and from operations which indirectly accelerate forest destruction. Agricultural lending must be fundamentally redirected away from the current industrial agriculture model. Rather, lending should increasingly support smallholder food production that builds on local knowledge and resources and increases local household and food security, local self-reliance and biophysical, social and economic sustainability. The World Bank should extend its commitment not to finance logging in primary moist tropical forests to all primary forests, including temperate and boreal forests. In addition, the World Bank should cease to support logging in an indirect fashion, such as through infrastructure and other development projects, as well as economic policies that accelerate forest exploitation.

50 Years Is Enough

Environment watch