By The Numbers
The moneylender twins
Twelve top business bodies of Bangladesh resented the interference of international lending agencies, especially the IMF, in the economic management of the country. The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) and eleven other business bodies, in a joint statement on August 1, urged the government to reject the IMF prescriptions.
According to business leaders, IMF is trying to impose conditions and dictate terms in every trifle detail of the economic management of a sovereign country. The recent IMF instruction for further trade liberalisation will be a suicidal decision for the economy if it is implemented. They have also cited as examples, Malaysia, Thailand, Singapore, Philippines and South Korea, which have ignored the IMF's and WB's prescriptions and achieved remarkable progress.
The speakers at a roundtable titled "World Bank and IMF in Bangladesh," held on August 22 in the city, severely criticized the interference of WB and IMF in the economic management of the country. They castigated the IMF for prescribing contractionary monetary policy, when the country's economy was expanding. The speakers also called for forging a citizens' alliance to stop WB and IMF dictating economic policy as they reckon that Bangladesh's economy has matured enough to grow without foreign aid.
Ignoring all these criticism the caretaker government is going to enter into a new deal with the IMF under which Bangladesh will get its economy reviewed by the IMF for attracting foreign aid. The new agreement called Policy Support Investment (PSI) will be signed soon as another such agreement, Poverty Reduction Growth Facility (PRGF), expires. Only four African countries, Nigeria, Uganda, Cape Verde and Tanzania have so far adopted PSI.
Bangladesh is the only Asian country which is going to adopt the PSI. Our caretaker government should be more cautious while dealing with the WB and the IMF as they had obliged the successive governments to carry out a series of anti-poor reforms.
IMF advised the government to increase the rate of interest to curb inflation and credit growth. Leading trade bodies of the country, including FBCCI, expressed deep concern over the IMF prescription to adopt a contractionary monetary policy by increasing the lending rates to check inflation. By following the meticulous IMF prescription the country's economy had to endure a double-digit inflation.
A recent newspaper report said that the government was under heavy pressure from the IMF and the WB for another increase of energy prices. The raising of power, oil and gas prices is seriously inflationary, as transportation and power generation are essential for production and distribution of goods, and will add fuel to our volatile price situation.
Former finance minister M Saifur Rahman strongly criticized the WB and IMF, saying that the two donors treat the finance minister as a clerk for adopting policy, particularly of raising the fuel prices. He also blasted the donors for their meddling in the domestic affairs of the country and said: "Donors must understand that the development programmes of our country are owned by us, not by them, and we will decide how we will implement them."
There was a time when it seemed as if the whole economic affair of Bangladesh was run by the WB and the IMF. The government was then compelled to go for many reforms that did not suit the needs of the country under the pressure from the WB and IMF. The donors' dictation in policy formulation increased significantly during the regime of the BNP-led alliance government compared to any previous regime since independence.
The economists claim that Bangladesh has now almost achieved the ability to implement its development programmes without lending from the WB and IMF. If it is a fact, then the government must not capitulate to any pressure from the moneylender twins, rather it should administer a befitting reply.
Though the pressure and prescriptions from the WB and IMF were not a new phenomenon for a country like Bangladesh, their dictation and direct involvement in the government's policy formulation added a new dimension because of the immediate past government's submissive attitude. The government possessed a lesser degree of sovereignty over economic policy making, which is still continuing.
The foreign lenders' direct involvement in the government's policy formulation is indeed a factor that has humiliated the nation. Everyone will agree that no sovereign government should be dictated to by the multilateral lending agencies in formulating its economic policies. The caretaker government must not be subservient to the WB and IMF for a paltry amount of $ 1 billion, while the expatriate Bangladeshis remit more than $ 6 billion a year.
It would not be an exaggeration to say that WB and IMF were the cause of many miseries in many developing countries, as the river Hwang Ho was in China. Experiencing this harsh truth, many developing countries are now moving away from the WB and IMF and refusing their services and loans. Argentina, Brazil, Indonesia, Turkey, Thailand and India, including a good number of Latin American, countries have already announced their intention to part with the moneylender twins. Pakistan is contemplating saying goodbye to WB and IMF.
It was China, India and South Korea that refused to pander to IMF diktats, and have now emerged as economic super-powers, attaining the highest level of growth during the last two decades.
When these two institutions were created at Breton Woods in 1944, their mandate was to help prevent future conflicts by lending for reconstruction and development, and by smoothing out temporary balance of payments problems. They had no control over an individual government's economic decisions, nor did their mandate include a license to intervene in national policy.
Thanks to the debt crises and the mechanism of conditionality, the Breton Woods twins have moved from the balance of payment support to being quasi-universal dictators of so-called "sound" economic policies, meaning, of course, neo-liberal ones.
The poorest Third World countries, battered by the structural adjustment programmes, are now demanding abolition of the WB and IMF and establishment of a new International Financial Institute that will operate in a far more democratic and transparent manner than the existing entities.
A N M Nurul Haque is a columnist of The Daily Star.
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