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.
Proposals
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