Committee for the Abolition of Illegitimate Debt

During the 1980s, the IMF 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 and 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.

earned themselves the highly justified but less than enviable reputation of being responsible for very unpopular measures forced upon governments of developing countries – in short, of being the bane of the poor. Admittedly the governments themselves, often in cahoots with the ruling classes, have found it convenient to place the blame on these distant institutions located on 19^th St NW in Washington. This unsavoury reputation spread like wildfire and newspapers in the South began to give it ample coverage [1].

Accustomed to making blunt recommendations for cuts in social expenditures or the privatization of public companies, these two institutions came to realize that plain speaking did not serve their interests. Very quickly, people recognized their leading role in economic and human disasters. Very quickly, the riots that followed price increases in essential goods were referred to as ‘anti-IMF riots’. And very quickly, public opinion put pressure on governments to resist the decrees of the IMF and the World Bank. In short, it was becoming more and more difficult to get people to swallow such a bitter pill.

A major public-relations plan was therefore launched in the 1990s to deal with the serious – and rightly deserved – legitimacy crisis that the IMF and the World Bank were then (and still are) facing. The argument focused on debt reduction and the fight against poverty. ‘We have learned and we have changed’ was the message. But the notorious ultra-liberal conditionalities that marked the structural adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).

IMF : http://www.worldbank.org/ plans of the 1980s are still being imposed. A series of examples from the early 2000s, on every continent, clearly expose the contradictions of the two institutions.

 Sri Lanka, Ecuador and Haiti: business as usual for neoliberal policies

Sri Lanka
In Sri Lanka, in 2005, the government refused a $389 million loan conditioned on political reforms such as restructuring of pension schemes and privatization of water resources [2].

Ecuador
In Ecuador, in July 2005, the government decided to reform the use of the country’s oil resources. Instead of being entirely earmarked for paying back their debt, part of those resources would now fund social programmes, notably for the often underprivileged indigenous communities. To show its displeasure, the World Bank withheld a $100 million loan to Ecuador (see chapter 23).

Haiti
In Haiti, during 2003, the IMF put an end to government-controlled fuel prices, thereby making them ‘flexible’. Within a few weeks, fuel prices rose by 130 per cent. The consequences were dramatic: problems boiling water for drinking or cooking food; an increase in transportation costs, which small producers passed on to the market, thus increasing the price of numerous basic commodities Commodities The goods exchanged on the commodities market, traditionally raw materials such as metals and fuels, and cereals. . But as inflation Inflation The cumulated rise of prices as a whole (e.g. a rise in the price of petroleum, eventually leading to a rise in salaries, then to the rise of other prices, etc.). Inflation implies a fall in the value of money since, as time goes by, larger sums are required to purchase particular items. This is the reason why corporate-driven policies seek to keep inflation down. is one of the IMF’s bugbears, it promptly imposed a wage freeze on the government. The daily minimum wage plummeted from $3 to $1.50 in 1994, which, according to the IMF, was a way of attracting foreign investors. It also served geopolitical interests, weakening President Jean-Bertrand Aristide and leading to his departure from office on 24 February 2004 – something the big powers had been pushing for.
Even in oil-producing countries such as Iraq and Nigeria, the IMF imposed the same system of flexible pricing. Rates increased, leading to organized protests by the people affected, for example in Basra in December 2005.

 In Sub-Saharan Africa, the World Bank prolonged the neoliberal attacks

Ghana
In Ghana, former President Jerry Rawlings had refused to adopt the Heavily Indebted Poor Countries Heavily Indebted Poor Countries
HIPC In 1996 the IMF and the World Bank launched an initiative aimed at reducing the debt burden for some 41 heavily indebted poor countries (HIPC), whose total debts amount to about 10% of the Third World Debt. The list includes 33 countries in Sub-Saharan Africa.

The idea at the back of the initiative is as follows: a country on the HIPC list can start an SAP programme of twice three years. At the end of the first stage (first three years) IMF experts assess the ’sustainability’ of the country’s debt (from medium term projections of the country’s balance of payments and of the net present value (NPV) of debt to exports ratio.
If the country’s debt is considered “unsustainable”, it is eligible for a second stage of reforms at the end of which its debt is made ’sustainable’ (that it it is given the financial means necessary to pay back the amounts due). Three years after the beginning of the initiative, only four countries had been deemed eligible for a very slight debt relief (Uganda, Bolivia, Burkina Faso, and Mozambique). Confronted with such poor results and with the Jubilee 2000 campaign (which brought in a petition with over 17 million signatures to the G7 meeting in Cologne in June 1999), the G7 (group of 7 most industrialised countries) and international financial institutions launched an enhanced initiative: “sustainability” criteria have been revised (for instance the value of the debt must only amount to 150% of export revenues instead of 200-250% as was the case before), the second stage in the reforms is not fixed any more: an assiduous pupil can anticipate and be granted debt relief earlier, and thirdly some interim relief can be granted after the first three years of reform.

Simultaneously the IMF and the World Bank change their vocabulary : their loans, which so far had been called, “enhanced structural adjustment facilities” (ESAF), are now called “Growth and Poverty Reduction Facilities” (GPRF) while “Structural Adjustment Policies” are now called “Poverty Reduction Strategy Paper”. This paper is drafted by the country requesting assistance with the help of the IMF and the World Bank and the participation of representatives from the civil society.
This enhanced initiative has been largely publicised: the international media announced a 90%, even a 100% cancellation after the Euro-African summit in Cairo (April 2000). Yet on closer examination the HIPC initiative turns out to be yet another delusive manoeuvre which suggests but in no way implements a cancellation of the debt.

List of the 42 Heavily Indebted Poor Countries: Angola, Benin, Bolivia, Burkina Faso, Burundi, Cameroon, Central African Republic, Chad, Comoro Islands, Congo, Ivory Coast, Democratic Republic of Congo, Ethiopia, Gambia, Ghana, Guinea, Guinea-Bissau, Guyana, Honduras, Kenya, Laos, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Myanmar, Nicaragua, Niger, Rwanda, Sao Tome and Principe, Senegal, Sierra Leone, Somalia, Sudan, Tanzania, Togo, Uganda, Vietnam, Zambia. initiative, but since John Agyekum Kufuor took power in January 2001, Ghana has been complying with conditions imposed by the IMF. One of these conditions – a significant one – concerned the water sector, for which the IMF demanded total cost recovery. In other words, households must bear the total cost of access to water, without the benefit of state subsidies. The price of a cubic metre of water had to be sufficient to recover total operating and management costs. Electricity was next in line and the same principle was applied. The goal was clear: to get the public companies on an even keel before privatization. In May 2001 the price of water rose by 95 per cent, and it did not stop there. The populations seriously affected by this measure formed the National Coalition Against the Privatization of Water. With one out of three Ghanaians having no access to drinking water, the World Bank made another fateful move: in 2004, it granted Ghana a $103 million loan in exchange for the sale of the utility supplying water to the main cities to a private multinational corporation.

Mali
In Mali, it was the cotton industry that was in the line of fire. For decades, the entire cotton sector was controlled by the Compagnie Malienne de Développement des Textiles (CMDT), jointly owned by the Malian government (60 per cent) and the French company Dagris (40 per cent). The CMDT, the real backbone of Mali’s economy, was the biggest currency earner for the Malian state through profits and taxes. Its role extended beyond the mere production of cotton. It provided public services, from maintaining rural roads and eliminating illiteracy among rural communities to the purchase of agricultural tools and construction of vital infrastructures. Until 1999, production was constantly on the increase: 200,000 tons in 1988, 450,000 in 1997, 520,000 in 1998, 522,000 in 1999. But the CMDT’s questionable management and very low prices triggered unrest among peasants, who refused to harvest in 1999/2000. Production that year fell by almost 50 per cent. The cotton sector’s forum, the Etats Généraux de la Filière Cotonnière, was held in April 2001; the Etats Généraux decided to introduce a series of drastic reforms including a 23 per cent reduction in total expenditure on wages, partial or total debt cancellation for smallholders, layoffs (500 to 800 people out of 2,400), the freeze of a planned 7 per cent wage increase, an increase in the guaranteed price paid to farmers from 170 FCFA/kg of cotton to 200 FCFA/kg, opening up of capital, recentring of activities and progressive withdrawal of the Malian state from the CMDT. In spite of the failed privatizations in the neighbouring countries (Benin and Côte d’Ivoire), the World Bank advocated outright privatization, causing great concern among the affected villagers. The first reorganizations, notably in transport and management of fertilizers and pesticides, led to massive disruptions, seriously penalizing Malian producers and putting harvests at risk in 2003 and 2004 [3].

In order to accelerate the process even more, and dissatisfied with the CMDT’s guaranteed price, which it found too high, the World Bank put pressure on the government by freezing a $25 million aid payment. By so doing, it disregarded the two factors responsible for the success of Mali’s cotton sector: a guaranteed minimum price and vertical integration.

In an article analyzing ‘the case of the Compagnie Malienne des Textiles, the parastatal in charge of supervising cotton production since 1974 in Mali’, Isaline Bergamaschi sums up the World Bank’s actions as follows:

The World Bank has exerted strong financial pressure on the government. Privatization became a conditionality to access debt relief operations in 1998. The government hence adopted a sector rehabilitation plan, a condition to benefit a third structural adjustment credit of $70 million granted in December 2001. In June 2001, the government adopted the Lettre de Politique de Développement du Secteur (LPDSC). In 2002, the IMF makes access to its Facility for Growth and Poverty Reduction conditional to the CMDT privatization. […] In November 2004, a World Bank delegation suspends aid disbursements until the government takes action to reduce deficits […]. They ask an amendment of the price mechanism and a ‘clear signal’ of government will to privatize. The credit is adopted in January 2005 after tense negotiations. In February, the Bank disbursed half of what should have been disbursed in December the previous year, thus depriving the country of greater Bank financial support [4].

An Oxfam Briefing Paper published in 2006 enunciates the overall problem:

Despite numerous commitments to reform, the World Bank and the International Monetary Fund (IMF) are still using their aid to make developing countries implement inappropriate economic policies, with the tacit approval of rich-country governments. These economic policy conditions undermine national policy-making, delay aid flows, and often fail to deliver for poor people. If the world is to make poverty history, this practice must be stopped. Aid must be conditional on being spent transparently and on reducing poverty, and nothing more.

and adds, in the specific case of Malian cotton:

Given the above climate, donors should be fighting amongst each other to provide aid for Mali. But before providing the much-needed funds, the World Bank and the IMF (and other donors) have required Mali to implement a number of controversial and counter-productive economic conditions: privatisation of the electricity supply, ending government support to cotton farmers by privatising the sector, and liberalising the price of cotton. These conditions have undermined country ownership, actively delayed Mali from receiving greater aid flows, and generally worsened poverty rather than making the situation better [5].

Niger

In Niger, there was no period of grace following the re-election of President Mamadou Tandja in December 2004. In January 2005, on IMF instructions, a law amending finances was enacted increasing VAT to 19 per cent on basic goods and services (wheat, sugar, milk, water and electricity). Massive social mobilization quickly ensued. In March, the population, already impoverished by years of bad harvests (caused by droughts and invasions of desert locusts) and structural adjustment plans (privatizations, cuts in social expenditures, layoffs and salary freezes in the civil service, etc.) took to the streets to express their dissatisfaction. The social movement, organized around three consumer organizations, succeeded in creating a large unified front for a ‘coalition against the high cost of living’, bringing together 29 organizations and the four trade-union federations. After several days of ‘dead town’ demonstrations and arbitrary arrests by police, their mobilization forced the government to back down.

Democratic Republic of Congo (DRC)
In the DRC, a parliamentary report published in 2006 denounced the action of the World Bank with respect to the mining industry [6]. Trouble broke out over the operation of a copper and silver mine in Dikulushi controlled by the Australo-Canadian company Anvil Mining. In October 2004, Mai-Mai militiamen occupied the neighbouring town of Kilwa, from where extracted minerals are sent to Zambia. The Congolese army then launched an operation to repress the uprising, causing the death of several dozens of individuals suspected of supporting the rebels (at least 100 people, according to the UN). Summary executions and plunder marked this strong-arm operation. It was against this background that the Anvil Mining company provided vehicles and equipment to the Congolese army, with a view to ensuring unhampered continuation of exports.

This did not prevent the Multilateral Investment Guarantee Agency (MIGA, an affiliate of the World Bank) from approving an insurance contract in April 2005 offering a guarantee of $13.3 million to cover political risks related to the expansion of this mining operation. Thus we see that the World Bank did not hesitate to support Anvil Mining’s dubious activities: the aforementioned report by the Congolese Special National Assembly Commission, entrusted with examining the validity of economic and financial agreements, written by 17 Congolese MPs from different parties, and led by Christophe Lutundula, severely criticized ‘the policy of splitting up the mining portfolio of the State’ in which Anvil Mining was implicated, essentially ‘to satisfy the immediate financial needs of governments’ [7]. According to the report, collusion between the Congolese authorities and Anvil Mining was flagrant: ‘Fiscal, custom, and para-fiscal exemptions were granted in an exaggerated way and for long periods of time ranging from 15 to 30 years. […] As a result, the Congolese State has been deprived of important fiscal resources that are crucial to its development.’ [8] But ultimately, any control over Anvil Mining’s operations was destined to fail since ‘public servants appointed on mining sites are taken care of by the private mining operators that they are supposed to control. These are the cases of Anvil Mining and COMISA; both pay inspectors from DGM, Regional Division of Mining, OCC etc. As a result, public servants completely lack autonomy, independence, and efficiency.’ [9] To cap it all, until March 2005 one of Anvil Mining’s significant shareholders (17.5 per cent of shares) was First Quantum, a Canadian company exposed in a 2002 UN report on the DRC for not respecting OECD OECD
Organisation for Economic Co-operation and Development OECD: the Organisation for Economic Co-operation and Development, created in 1960. It includes the major industrialized countries and has 34 members as of January 2016.

http://www.oecd.org/about/membersandpartners/ guidelines governing multinationals. How can the World Bank, via MIGA, continue to offer guarantees Guarantees Acts that provide a creditor with security in complement to the debtor’s commitment. A distinction is made between real guarantees (lien, pledge, mortgage, prior charge) and personal guarantees (surety, aval, letter of intent, independent guarantee). to a company that has demonstrated how little it respects the fundamental rights of the people of the Kilwa region? In offering a guarantee under such circumstances, MIGA made itself a direct accomplice in Anvil Mining’s reprehensible actions.

Chad

In Chad, since the start of construction of a 1,070-kilometre pipeline linking the oil-producing region of Doba (Chad) to the maritime port of Kribi (Cameroon), numerous environmental, human rights and international solidarity organizations have expressed concern over the World Bank’s support for the project. From the outset, the environmental, human and financial risks were so great that Shell and Elf preferred to pull out. Still the final consortium consisting of ExxonMobil, ChevronTexaco (USA) and Petronas (Malaysia) was able to complete the $3.7 billion project thanks to powerful strategic and financial support from the World Bank.

To justify its support, the World Bank committed to a pilot programme designed to allow Chadians to benefit from the profits made. In making this investment – the largest in Sub-Saharan Africa – it imposed its conditions: Chad’s president Idriss Déby Itno must devote 90 per cent of the revenue earned from oil sales to social projects selected with its approval and to investments in the Doba region. The remaining 10 per cent must be reserved for future generations: they were deposited in a blocked account at Citibank London, under World Bank control.

This arrangement failed since Déby appropriated the sums allocated for future generations: it is estimated that he helped himself to at least $27 million. Moreover, he changed the rules of the game by including security expenditures in the definition of priority sectors to be financed by oil revenue. Weakened by high social tensions, attempts to overthrow him and army desertions, Déby sought to reinforce his military and repressive machine. In December 2005 the World Bank reacted by blocking existing loans to Chad, pretending to have become aware only then of the authoritative and corrupt nature of the regime, when in fact the Bank’s support for the project had allowed Déby to strengthen his power base and bolster his personal fortune for a decade.

All the bombast by World Bank experts on good governance, corruption and reducing poverty is a dismal farce. It was clear from the beginning that this project would end up allowing a notorious dictator to become even wealthier, with total impunity. Each side did just what was expected of it. The World Bank enabled the construction of a pipeline that allows oil multinationals to help themselves to a natural resource and their shareholders to reap juicy profits. And Chad’s president helped himself to the wealth that belongs to the people.

Corruption and dictatorship in Chad must be denounced and fought, but that will not be enough. The World Bank was the determining element in a project that placed a heavy burden of debt on Chad, increased corruption and poverty, continues to damage the environment and allows a natural resource to be abusively exploited. In short, in Chad as elsewhere, the World Bank knowingly supports a predatory model and for 30 years has knowingly propped up a corrupt dictatorship. In 2021, Idriss Déby’s regime was still in place, and the World Bank financed it to the day he died, on 20 April 2021.
Note that an evaluation commissioned by the World Bank and handed over to its executives in 2009 had considered the project a failure in terms of poverty reduction, environmental protection and good governance: ‘In conclusion, the evaluation report states that in the case of Chad, the objective targeted by the WBG through its financing of the program has not been reached, namely poverty alleviation and governance improvement for the best possible use of the oil revenues, in an environmentally and socially sustainable manner.’

Like several other African countries, Chad still struggles under a high level of debt under the combined effects of the Coronavirus crisis and low oil prices (oil being its principal export product).

In 2021, Chad became the first country to request restructuring of its debt. The IMF announced Chad’s decision in a declaration concerning a new four-year programme with a value of some $572 million under an Extended Credit Facility and Extended Fund Facility arrangement.

The official results of the Chadian presidential election in May 2024 have confirmed the long-term consolidation of power by Mahamat Déby, the son of the dictator who died in April 2021. Chadians are preparing for a new cycle of authoritarian rule. Helga Dickow is right to write: “Several incidents have shown that the son’s use of force exceeds that of his father. On 20 October 2022, several hundred people were shot dead during demonstrations against Mahamat Déby’s candidacy in the election. Pressure on the opposition was intensified by the execution of opposition leader Yaya Dillo on 28 February 2024. Dillo was a cousin of Mahamat Déby and a serious presidential candidate. After his assassination, almost the entire opposition was silenced.”Chad: Mahamat Déby confirms the continuity of authoritarian rule after his election victory, The Conversation, 7 June 2024, https://theconversation.com/tchad-mahamat-deby-confirme-la-continuite-du-regime-autoritaire-apres-sa-victoire-electorale-231692