How The G8 Lied To The World On Aid

26 August 2005 by Mark Curtis


World leaders are now preparing for the millennium summit to be held in New York next month, described by the UN as a “once-in-a-generation opportunity to take bold decisions”. Yet the current draft outcome simply repeats what was agreed on aid and debt last month in Gleneagles. The reality of that G8 G8 Group composed of the most powerful countries of the planet: Canada, France, Germany, Italy, Japan, the UK and the USA, with Russia a full member since June 2002. Their heads of state meet annually, usually in June or July. deal has recently emerged - and is likely to condemn the New York summit to be an expensive failure.

The G8 agreed to increase aid from rich countries by $48bn a year by 2010. When Tony Blair announced this to parliament, he said that “in addition ... we agreed to cancel 100% of the multilateral debts” of the most indebted countries. He also stated that aid would come with no conditions attached. These were big claims, all of which can now be shown to be false.

First, in recent evidence to the Treasury committee, Gordon Brown made the astonishing admission that the aid increase includes money put aside for debt relief. So the funds rich countries devote to writing off poor countries’ debts will be counted as aid. Russia’s increase in “aid” will consist entirely of write-offs. A third of France’s aid budget consists of money for debt relief; much of this will be simply a book-keeping exercise worth nothing on the ground since many debts are not being serviced. The debt deal is not “in addition” to the aid increase, as Blair claimed, but part of it.

Far from representing a “100%” debt write-off, the deal applies initially to only 18 countries, which will save just $1bn a year in debt-service payments. The 62 countries that need full debt cancellation to reach UN poverty targets are paying 10 times more in debt service Debt service The sum of the interests and the amortization of the capital borrowed. . And recently leaked 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.

documents show that the G8 agreed only three years’ worth of debt relief for these 18 countries. They state that “countries will have no benefit from the initiative” unless there is “full donor financing”.

The deal also involves debts only to the International Monetary Fund IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org
, the World Bank and the African Development Bank, whereas many countries have debts to other organisations. It is a kick in the teeth for the African Union, whose recent summit called for “full debt cancellation for all African nations”.

The government’s claim that debt relief will free up resources for health and education is also a deception. The deal explicitly says that those countries receiving debt relief will have their aid cut by the same amount. If, say, Senegal is forgiven $100m a year in debt service, World Bank lending will be slashed by the same amount. That sum will be retained in the World Bank pot for lending across all poor countries, but only when they sign up to World Bank/IMF economic policy conditions. And this leads to the third false claim.

Blair’s assertion that aid will come with no conditions is contradicted by Hilary Benn, his development secretary, who told a parliamentary committee on July 19 that “around half” of World Bank aid programmes have privatisation conditions. Recent research by the NGO network Eurodad shows that conditions attached to World Bank aid are rising. Benin, for example, now has to meet 130 conditions to qualify for aid, compared with 58 in the previous agreement. Eleven of 13 countries analysed have to promote privatisation to receive World Bank loans, the two exceptions having already undergone extensive privatisation programmes. Yet in the G8 press conference Blair refuted the suggestion that privatisation would be a condition for aid.

According to recently leaked documents, four rich-country representatives to the IMF board want to add yet more conditions to debt relief. This will be a key topic for discussion at the IMF’s annual meeting the week after the millennium summit. The British government opposes new conditions but continues to support overall conditionality.

This makes a mockery of Brown and Blair’s claim that poor countries are now free to decide their own policies. It is true that the G8 communique stated that “developing countries ... need to decide, plan and sequence their economic policies to fit with their own development strategies”. Yet it also stated that “African countries need to build a much stronger investment climate” and increase “integration into the global economy” - code for promoting free trade - and that aid resources would be focused on countries meeting these objectives.

Poor countries are free to do what rich countries tell them. The cost is huge. Christian Aid estimates that Africa has lost $272bn in the past 20 years from being forced to promote trade liberalisation as the price for receiving World Bank loans and debt relief. The draft outcome of the millennium summit says nothing about abolishing these conditions and contains little to address Africa’s poverty. With only a few weeks to go, massive pressure needs to be brought to bear.

Mark Curtis is the author of Unpeople: Britain’s Secret Human Rights Abuses, www.markcurtis.info.




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