Committee for the Abolition of Illegitimate Debt

The World Bank World Bank
WB The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

is actively engaged in improved the system of water supply in the State of Kerala. [1] The Bank’s policy clearly aims at withdrawing the State from its responsibilities in the design and the management of the system of supplies and distribution of water. According to the programme set up by the Bank with the support of the government of Kerala and the central government in Delhi, the State intervenes only in the issue of financing. It borrows the funds from the World Bank and repays it with an interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. rate of 2%.

In order to understand the system set up by the Bank, we went to Kadanad, 50 km from Cochin where Joy Thomas, the president of the Panchayat, received us. Panchayat is a rural territorial entity equipped with an elected assembly and is present everywhere in India. The State of Kerala consists of about 1,000 Panchayats among which 110 have been included in the programme masterminded by the World Bank. Approximately 4,000 families live in the Kadanad Panchayat i.e. roughly 20,000 inhabitants. Agriculture is the principal activity: rubber production is pre-dominant, while 70% of the rice fields were abandoned due to lack of water, and especially due to lack of profitability. Rice imported from other Asian countries competes with the locally produced rice. In the Kadanad Panchayat, rubber production is almost a monoculture Monoculture When one crop alone is cultivated. Many countries of the South have been induced to specialize in the production of a commodity for export (cotton, coffee, cocoa, groundnuts, tobacco, etc.) to procure hard currency for debt repayments. .

The president of the Panchayat explained to us that the work is under progress in order to improve storage and purification of rainwater and river-water. This will enable 300 litres of water to be provided per day per family (approximately 60 litres per head). According to Joy Thomas, the principle is simple: the World Bank puts in 75% of the funds (one will further see that in reality this money has to be paid back to the Bank), Panchayat puts in 10% and the target families put in 15%. The total cost of the investment rises to 35 million rupees (approximately 636,300 euros since 1 euro = 55 rupees).

What are the various stages of the project?

1. The Panchayat agrees to enter the system conceived by the World Bank.

2. An NGO is chosen by the Indian State to manage the actual launching of the project. In this case, it is ESAF, Evangelical Social Action Forum. ESAF provides 6 engineers and 14 employees who lay out the project and direct the construction work. According to Joy Thomas, ESAF receives 10% of the total amount for the project, that is to say 3.5 million rupees (63,630 euros) as payment against its services. Its mission is accomplished once the system starts to function.

3. The families intending to become beneficiaries of the project must pay their share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. (i.e. 15% of the total cost). There are two categories of beneficiary families: those that receive river water through canals and those that receive rainwater collected in large reservoirs (under construction now). The first category will pay 70 rupees per month. The second category will pay 2,300 rupees in several instalments and will become joint owner of the large rainwater reservoirs. The recipients will pay for the maintenance of the equipment and this expenditure is included in the amount indicated above.

4. The Panchayat pays 10% of the project cost on the basis of the grant provided by the State of Kerala.

It must be realised that the Bank intelligently plays its game in this affair. From the outset, everyone is gaining: the State which is free from responsibilities, the NGO which just accompanies the consumers whose interests seem to be taken into account, the local authority is not involved in the debt. The only people not to be invited to the festival are the poorest, who do not at all have the means to have their voice heard. Yet, the State will repay the World Bank by drawing from its tax revenues, which are paid mainly by the poor (tax on consumption).

What are the concrete criticisms then?

1. This system is unacceptable because it does not guarantee the population’s universal access to drinking water: indeed, the families, which are unable to pay 70 rupees per month or 2,300 rupees in several instalments, are excluded from the right to water. During our conversation, the Panchayat president acknowledged that water used to be freely distributed earlier. The sum of 70 rupees is a considerable amount for poor families (not to mention the 2,300 rupees referred to as above). In order to verify, we asked him if the Panchayat gave grants to poor people, he answered in the affirmative. 646 people are assisted because they do not have any income: they receive a monthly sum that varies from 110 to 140 rupees (or from 2 to 2.5 euros per month!). How can they earmark 70 rupees per month for water only, if they receive just 110 to 140 rupees [2] of minimum income guaranteed per month?

2. The public authorities are released from a large part of their responsibilities in this system whereas they should be responsible for the management of the quality of water, its storage, its collection, its distribution and its purification in the interest of the entire population. The authorities must recruit qualified personnel and guarantee the quality of the services rendered to the population by integrating them into the decision-making process. On the contrary, in the system invented by the Bank, at first the NGO replaces the authorities; then the recipients take over because they are left to themselves for the maintenance of the equipment.

3. The World Bank stands out a bit more in the field of water without being charitable. It will be completely reimbursed and the interest will be paid to it as well. Why then resort to its services? Why not resort to taxes and revenues for the direct financing of the project cost without resorting to an external debt in hard currencies?

In conclusion, two important actors play an eminent yet questionable part within the current framework: the Indian State supports the system of setting the authorities free from responsibilities while indebting the country and the World Bank is the instigator of this new trap.

Translated by Sushovan Dhar