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Note: This document is from the archive of the Africa Policy E-Journal, published
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Africa: Monterrey Promises, 1
Africa: Monterrey Promises, 1
Date distributed (ymd): 020320
Africa Action Document
Africa Policy Electronic Distribution List: an information
service provided by AFRICA ACTION (incorporating the Africa
Policy Information Center, The Africa Fund, and the American
Committee on Africa). Find more information for action for
Africa at http://www.africaaction.org
+++++++++++++++++++++Document Profile+++++++++++++++++++++
Region: Continent-Wide
Issue Areas: +economy/development+ +US policy focus+
SUMMARY CONTENTS:
This posting contains a brief statement by Africa Action on issues
neglected or ignored at Monterrey. It also includes a recent action
alert from the Globalization Challenge Initiative on the
privatization of water in Ghana - an illustration of how policies
imposed by "donors" in the guise of "reform" in fact add additional
burdens on the poor and undermine the purported commitment to
poverty reduction.
A related posting also distributed today contains excerpts from a
briefing paper on poverty reduction released by Oxfam International
on the eve of global Financing for Development Conference being
held this week in Monterrey. The Oxfam paper serves as one
benchmark for the enormous gap between the rhetoric of world
leaders, including new promises rolled out for Monterrey, and the
reality of actual resources delivered for public investment to
address global inequality.
The official Financing for Development conference site, with live
webcast, speeches, and other documents, is available at:
http://www.un.org/ffd
+++++++++++++++++end profile++++++++++++++++++++++++++++++
Africa Action Statement
on the Monterrey Conference on Financing for Development and the
Bush Administration proposal for increased Aid to Poor Countries
March 20, 2002
President Bush travels to Monterrey, Mexico tomorrow to attend the
International Conference on Financing for Development, a global
summit to discuss reducing world poverty. The two key issues
highlighted by the rich donor countries are (1) how much aid should
they provide poor countries, and (2) what they will require of
poor countries in terms of better governance.
We welcome the momentum toward realistic levels of development
assistance, and agree that governments of both rich and poor
countries should be held accountable. But we are appalled that the
priority concerns of African countries have been largely
sidelined.
The cancellation of Africa's illegitimate foreign debts and the
full funding of the UN Global AIDS Fund are the essential first
steps for saving millions of lives lost each year in Africa to
poverty and the closely linked health crisis. These issues should
top the agenda.
In Monterrey, Bush will present a new U.S. initiative. On Thursday
last week, the President announced a proposed increase in U.S.
assistance to developing countries. But the proposal was so hastily
prepared that the White House has already had to issue corrections.
As now described, the White House proposes an additional $10
billion in aid to developing countries over three years beginning
in 2004. Named the Millennium Challenge Account, the initiative
offers increased funding to countries who meet specific criteria
including economic policies and governance conditions defined by
Washington. Currently, most U.S. aid goes to two strategic allies
in the Middle East, not to fight poverty in Africa.
The Bush initiative requires closer scrutiny. It reflects the
White House's concern with criticism at Monterrey and from groups
like ourselves, pointing out the fact that the richest country in
human history is not contributing its fair share. But it does not
show serious planning and commitment commensurate to the need.
The essence of the initiative is a bargain: countries deemed to be
well behaved will be rewarded with greater U.S. funding. But the
planned increase does not begin until 2004, and the requirement
for greater resources to fight poverty is immediate, The promised
increase is still well below what the U.S. can and should provide
immediately to channels for effective delivery of resources that
are available now.
It has been clearly demonstrated, for example, that public
investment in health is effective in reducing poverty and
promoting economic growth. It is correct to demand that resources
are used effectively to achieve their intended purposes, but the
monitoring mechanisms should be independent rather than
unilaterally imposed by donors. These investments by rich countries
are an obligation and moral responsibility, not an optional
commitment.
The Bush proposal also fails to offer anything new on debt
cancellation. The U.S. contribution to the Global AIDS Fund remains
a meager pledge of $500 million over two years. Bush's announcement
may reap short-term public relations dividends, but it fails to
address today's most desperate needs.
Similarly the summit taking place this week in Monterrey has
misplaced its priorities. The leaders of the world's richest
countries promote free trade and foreign investment as the engines
of development, supplemented by small increases in aid. But the
principal obstacles to reducing poverty in Africa remain the
hemorrhaging of some $14 billion in annual debt repayments to rich
foreign creditors and the AIDS pandemic and the larger health
crisis it represents.
This year is going to be critical in determining how the U.S. and
other rich countries respond to Africa's economic challenges. In
the aftermath of September 11th, they are being forced to address
the widening divide between rich and poor countries. New
international efforts, including those emerging from Monterrey,
must be measured by how they respond to Africa's greatest immediate
challenges: Debt and AIDS!
- - Africa Action
N
Globalization Challenge Initiative
http://www.challengeglobalization.org
Ghana Water Privatization: Update
March 14, 2002
Dear Friends,
A heartfelt thanks to all of you for signing on to the letters to
the IMF and the World Bank regarding water privatization in Ghana.
We have received a very unsatisfactory reply from the IMF which you
can view at:
http://www.citizen.org/cmep/Water/cmep_Water
Below we have drafted a response to the IMF's letter and we would
encourage everyone to respond directly to the IMF. Ghana was
awarded entry into the debt relief program of the IMF and the World
Bank last week. Prior to entry, the government of Ghana negotiated
the next tranche of their loan from the IMF. Again, the loan
included conditions requiring full cost recovery (increased
consumer fees) for water and electricity and an automatic
adjustment formula (that would tie water and electricity fees to
the fluctuations of the Ghanaian currency on the international
market)! Below is an action alert regarding these loan conditions.
Again, we encourage everyone to write directly to the IMF in
protest. E-mail and fax numbers of key IMF officials are below.
Action Alert
New IMF Loan to Ghana Includes Conditions That Will Raise the Cost
of Water
A newly released IMF loan document, dated March 5, 2002, discusses
the conditions imposed for the fourth and fifth tranche of Ghana's
loan under the IMF's so-called Poverty Reduction and Growth
Facility. The document states that IMF authorities will continue
to require implementation of full cost recovery(1) in the public
utilities as a condition for releasing the next tranche of the
loan. In addition, the IMF will continue to require that the Public
Utility Regulatory Commission develop an automatic tariff
adjustment formula(2) for electricity and water. (See definition of
full cost recovery and automatic adjustment formula at bottom of
alert) (See the IMF document at:
http://www.imf.org/external/pubs/cat/longres.cfm?sk=15691.0)
IMF and World Bank loan conditions mandated a 95 percent price hike
in water fees in May 2001. The new IMF loan conditions mean that
additional price hikes will be planned. "The current water tariff
rates that the government of Ghana and the World Bank think are
below the market rate, are already beyond the means of most of the
population in Ghana," says Rudolf Amenga-Etego of the National
Coalition Against Privatisation of Water. "So, how will the
population possibly be able to absorb a so-called market price in
the context of privatization?"
For a number of years, World Bank and IMF policies have been
pushing the government of Ghana to increase consumer fees for water
and lease the water system to transnational water corporations. A
broad cross-section of Ghanaian civil society, including students,
trade unions, nurses, farmers and women's groups, many under the
banner of the Ghana National Coalition Against Privatisation of
Water, oppose the proposed privatization of the urban water system
and the increased water fees.
The average price for a bucket of water, which used to be 400
cedis, rose to 800 cedis following the May 2001 price hike. (One
U.S. dollar exchanges for 7,000 cedis.) Currently about 35 percent
of the Ghanaian population lacks access to safe water and 68
percent lack sanitation services. More than 60 percent of the
population earns less than US$1 a day and approximately 40 percent
fall below the national poverty line.
TAKE ACTION
Please send a fax or e-mail to the following people urging them to
remove IMF and World Bank conditions requiring full cost recovery,
automatic tariff adjustments, and water privatization in Ghana.
Water is essential to human life! Access to clean and affordable
water is a human right! It should not be treated as a common
commodity or economic good to be bought and sold in the market
place.
Please send a copy of your message to <
waterforall@igc.org >
Mr. Horst Kohler
Managing Director
International Monetary Fund
700 19th Street, N.W.
Washington, D.C. 20431
Email: hkohler@imf.org
Fax: (202) 623-4661
Mr. G.E. Gondwe
Director, African Department
International Monetary Fund
700 19th Street, N.W.
Washington, D.C. 20431 USA
Fax: 202 623-6587
Mr. Hugh Bredenkamp
West Africa Region
International Monetary Fund
700 19th Street, N.W.
Washington, D.C. 20431
Email: hbredenkamp@imf.org
Fax: 202 623-4232
Mr. James Wolfensohn
President
The World Bank
1818 H Street, N.W.
Washington, D.C. 20433
Email: jwolfensohn@worldbank.org
Fax: 202 522-7700
Mr. Callisto Madavo
Africa Region Vice President
The World Bank
1818 H Street, N.W.
Washington, D.C. 20433 USA
Fax: 202 477-0380
Email: cmadavo@worldbank.org
Mr. Peter Harrold
Country Director for Ghana
The World Bank
P.O. Box M. 27
Accra, Ghana
Fax: (233-21) 227-887
Email:
pharrold@worldbank.org
At the websites below you can find background information
including:
- A very detailed report and analysis by Christian AidN
- Water is Life. A statement from CAP of Water Campaign
- International Sign-On letters sent to the IMF and the World
Bank regarding water privatization in Ghana
http://www.waterobservatory.org
http://www.citizen.org/cmep/Water/cmep_Water/
(1) Full cost recovery is the term used by the World Bank to mean
removing public subsidies for water and increasing consumer fees or
tariffs until they cover the full costs of operation and
maintenance of the water utility. Imposing "full cost recovery"
commonly precedes privatization in order to improve the financial
standing of the company prior to its sale.
(2) Automatic tariff adjustment formula in Ghana would require that
tariffs reflect shifts in the international exchange rate of the
cedi. In other words, consumer rates go up when the value of the
cedi depreciates in international markets. This is a common
requirement of multinational corporations who want to be shielded
from the effects of shifts in soft currency exchange rates when
they invest in developing countries.
Letter to the International Monetary Fund
March 13, 2002
Mr. Horst Kohler
Managing Director
International Monetary Fund
700 19th Street, N.W.
Washington, D.C. 20431
Cc: Mr. G.E. Gondwe, Director, African Department
Mr. Hugh Bredenkamp, West Africa Region
Ms. Kathleen L. White, Public Affairs Division
Dear Mr. Kohler:
We thank Ms. Kathleen White of the External Relations Department
for her response to the international sign-on letter on water
sector reform in Ghana. However, it appears that neither yourself
nor the members of the African Department take the concerns of
international civil society organizations very seriously. The
statements and concerns in our letter, dated February 19, 2002,
still stand. Nothin in Ms. White's reply even begins to be
persuasive enough to convince us otherwise. Allow me to respond to
her letter point by point.
First, on the fundamental question of public debate and public
participation in key policy decisions such as the provision and
management of water services. Ms. White's reply states that ".we
would endorse the principle that key policy choices should be
subject to public debate and participation, as you suggest."
Unfortunately, the twenty-year history of IMF structural adjustment
programs around the world belies this statement. Time and time
again, in country after country, key policy decisions have been
made in closed-door meetings between IMF officials and Finance
Ministers without the benefit of citizen participation. And, this
is precisely what has happened in Ghana. We are certain that you
and the members of the African Department are well aware of the
fact that the last two tranches of Ghana's IMF loan (the fourth
tranche and the fifth tranche) from the Poverty Reduction and
Growth Facility include conditions related to implementation of
full cost recovery and automatic tariff adjustment formulae for
electricity and water. These, like many other key policy
decisions, have not been subject to broad-based citizen
participation.
Second, Ms. White's reply states "we have, in fact, supported the
proposals drawn up by the independent Public Utilities Regulatory
Commission (PURC) to move to full cost recovery, and to adopt
automatic adjustment formulae to keep tariffs in line with the
costs of water provision."
Yes, the Ghana Public Utilities Regulatory Commission is a
constitutionally-mandated independent agency. Perhaps it should be
considered inappropriate for the IMF to use its leverage through
loan conditionalities to meddle in the internal affairs of an
independent agency. The IMF states that this pricing reform (full
cost recovery and automatic adjustment formulae) is "necessary to
safeguard macroeconomic stability." Does this mean that it is
outside of the purview of the PURC to make this decision? By
stating that the PURC's implementation of full cost recovery and
automatic adjustment mechanisms will be a condition for completion
of the fourth and fifth review of Ghana's IMF loan, the IMF is
again undercutting the possibility of a participatory
decision-making process. As a constitutionally mandated
independent agency, the PURC has the responsibility to be
accountable to the citizens of Ghana, not to the dictates of the
IMF - even when the IMF places substantial pressure on the
independent agency, and the government, through the imposition of
loan conditions of this type.
Third, Ms. White states that "the PURC's plan was developed through
extensive consultation with civil society in Ghana." As you are
well aware, the pressure toward water privatization and full cost
recovery in Ghana has generated some serious opposition within the
country. A broad cross-section of Ghanaian civil society,
including women's groups, teachers, trade unions, public health
workers and students, have raised concerns that full cost recovery
and automatic adjustment formulae could have serious negative
impacts on public health, women's work, and access to clean and
affordable water. While, as you say, consultations with civil
society have taken place, it would be an exaggeration to label them
"extensive." But, more importantly, it is clear that the
dissenting opinions voiced during those consultations have not
swayed the IMF's decision to require the PURC to implement full
cost recovery and automatic adjustment mechanisms. This is
evidenced by the fact that the same conditions have been imposed on
the PURC in the fourth and fifth tranche of the IMF loan.
In a country where 60 percent of the population earns less than
US$1 a day and more than two-thirds of the population earns less
than US$2, continued price hikes in the cost of water are not just
an idle concern. Access to clean water is a life and death matter.
As you might imagine, emotions run high on the matter. A regional
coordinator of the Ghana National Coalition Against the
Privatization of Water stated recently in a letter to the World
Bank that automatic tariff adjustment formulae would be ".a deadly
poison and a prescription for death for the poor! How on earth can
PURC be strengthened if you are prescribing the formula for them."
On a final point, Ms. White states that, "the government indicates
in its latest letter of intent under Ghana's PRGF arrangement that
it is considering the provision of targeted subsidies to "buy down"
water rates for the poor." Universal access to water and
sanitiation services should be considered a basic human right. It
should not be a charity that can be doled out by governments as
"targeted subsidies" to those that fulfill the "needs-based
assessment" of some administrative bureaucracy. Rather than
impose full cost recovery and automatic adjustment mechanisms that
will then require that the government "buy down" water rates for
the poor, perhaps there should be a re-consideration of the basic
IMF and World Bank prescription. It might even be cheaper to
actually provide the funds to rehabilitate the aging infrastructure
of the Ghana Water Company, Ltd.
Regards,
Sara Grusky
U.S. Coordinator, International Water Working Group
Public Citizen, Water for All Campaign
This material is being reposted for wider distribution by
Africa Action (incorporating the Africa Policy Information
Center, The Africa Fund, and the American Committee on Africa).
Africa Action's information services provide accessible
information and analysis in order to promote U.S. and
international policies toward Africa that advance economic,
political and social justice and the full spectrum of human rights.
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