Redefining priorities of IFIs

This year's IMF-World Bank annual meetings were marked by a state of siege around their buildings in Washington D.C. While security officers checked every visitor with x-ray scanners and bomb-sniffing dogs, fences and concrete barricades were erected to ensure fool-proof security of the finance ministers and central bankers from about 180 countries who, under heavy guard, pushed for a stepped-up fight against terror financing, with the simultaneous warning that the poor must not be forgotten in the process.
James Wolfensohn, World Bank President, in his usual style, was more blunt and declared that "terror has reached our door. One need only look at the cement barriers surrounding these buildings to understand the big difference of the past year."
However, he was also concerned that heavy spending on poverty might eat into the aid for the poor and underscored the fact that sole emphasis on terrorism could result in losing sight of the "longer-term and equally urgent causes of an insecure world: poverty, frustration and lack of hope".
The finance officials, particularly from developed countries, were so obsessed with terror financing, that they focussed primarily on highlighting the link between global security and economic prosperity.
There is no denying the fact that terrorism and its effects on the global economy and consequences in terms of social and political behaviour have assumed great importance after the events of 9/11, and threats of more or less similar nature are still looming large even after three years of the tragic incident.
In this kind of environment, promotion of peace and security had to be a major agenda item that required co-ordinated action.
More specifically, there was a need to implement global standards to combat money laundering and terror funding. Also, meticulous arrangements had to be made at the venue of the meetings because the US government had raised the threat level on August 1, 2004, saying that it had found evidence that financial targets, including the World Bank and IMF, could be at risk of attacks.
However, combating of terrorism, though understandable, should not be allowed to distract the participants of the IMF-World Bank meetings from the real agenda of focussing on global economy and repositioning the multilateral institutions to help the member countries in need of their resources, particularly those falling in the category of underdeveloped.
The fact that issues like the world economy, poverty and promotion of trade were overshadowed by security considerations was of course sad and must have disappointed some of the poor countries. Nonetheless, remarks by the World Bank President that security needs might jeopardise aid to the poor and causes of world wide insecurity, like poverty, frustration and lack of hope must be looked into, were timely.
These issues should have been, in our view, raised by majority of the delegates and with greater force. The reasons for suggesting this approach are very clear and straightforward. Too much emphasis on security could divert resources from other uses like uplift of social sectors, which are definitely more desirable.
The point made by James Wolfensohn that poverty and frustration are major factors in breeding and promoting insecurity is also very valid. In other words, tangible efforts by developed countries to remove these causes could lower the level of threat of terrorism and its perception.
This does not mean, however, that political issues and their resolution in a satisfactory manner are less relevant in tackling the problem of terrorism.
While we do not doubt the sincerity of the World Bank President in making such observations, it may be argued that multilateral institutions like World Bank, ADB and IMF are better placed to take the lead in combating poverty in the longer term interest of humanity.
This is so because on a bilateral basis developed countries generally grant or remit loans after exacting their own pound of flesh or with specific motives while IFIs have no axe to grind and generally treat all the countries alike in similar situations.
For some of the more indebted countries, debt servicing has emerged as the single largest factor in promoting poverty and stagnation, which sometimes is seen to be the root cause of terrorism.
There have been certain proposals for selective debt alleviation on the table for a long time. In our view, the management of IFIs should be more pro-active to ensure that debt alleviation measures are adopted by their respective boards to provide substantial relief to the poor countries.
Also, there is a need for scaled-up support of the World Bank Group (IDA, IFC & MEGA) to mobilise substantial incremental resources to achieve the Millennium Development Goals for eradication of poverty by 2015. Besides, some of the available facilities can be easily re-profiled for the developing countries if there is a will to provide relief to the needy.
For instance, terms for prepayment of loans can be relaxed and past loans acquired at high interest rates be rescheduled for a longer period and at lower rates.
The World Bank and other multilateral institutions should convince their boards about the desirability of initiatives which could help the poor countries in alleviating poverty and hopelessness for the promotion of peace and security in the world.