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World: IMF, World Bank Say UN Poverty Reduction Plan At Risk

In the year 2000, 189 member states of the United Nations adopted a resolution called the Millennium Development Goals, whose main objective was to reduce worldwide poverty in the next decade. But a new report by the International Monetary Fund (IMF) and the World Bank says that goal risks not being met.

Prague, 26 April 2004 (RFE/RL) -- The International Monetary Fund (IMF) and the World Bank have issued a joint report warning that plans outlined by the United Nations four years ago to halve 1990 global poverty levels by the year 2015 will most likely not be met if current trade and aid policies continue.

The IMF and World Bank Global Monitoring report was issued this past weekend in Washington, on the occasion of the two organizations' annual meeting.

"What is needed is very much local-level, community-driven initiatives -- and the IMF and the World Bank simply aren't set up to meet that need."
The report noted that two developing countries that account for around a third of the world's population -- China and India -- have made great progress in recent years in reducing poverty. This has helped bring down the number of people around the world living in extreme hardship from 40 percent in 1981 to 21 percent in 2001.

The economies of both China and India have rapidly liberalized in the past decade and both countries have become centers of international trade and manufacturing, enabling them to profit from globalization. The most dramatic statistics illustrating this change come from China, where gross domestic product (GDP) has risen 500 percent since 1981.

In 1981, 600 million Chinese, or two-thirds of the population, lived in extreme poverty, according to the World Bank and IMF. Today, that number is down to 200 million, or only 17 percent of the population.

By contrast, the situation in much of Africa, Latin America, and the former Soviet Union has only improved slightly and, in some cases, it has worsened.

The report notes that 90 million people living in Eastern Europe and the former Soviet Union now subsist on less than $2 per day. The collapse of industry after the fall of communism and the rise in unemployment in many regions explains those numbers.

The report says that many countries in this region have failed to adopt policies to encourage private-sector growth and improve transparency in order to combat corruption. They have also increased military spending when they should be devoting more of their scarce resources to social programs.

But the IMF and the World Bank also say rich countries have failed to live up to their own promises to liberalize trade, especially in the agricultural sector. Some 70 percent of the world's poor live in rural regions and depend for their livelihoods on agriculture.

Yet, as the report notes, two-thirds of the world's agricultural trade actually originates in the world's richest countries. This is in part because wealthy areas, such as the United States and the European Union, spend $330 billion per year to subsidize their own agricultural producers.

The IMF and World Bank report focuses much-needed attention on the issue of global poverty, but ironically, there are some who say it is these two organizations that are part of the problem.

Romilly Greenhill, of Action Aid -- one of Britain's largest overseas development organizations -- tells RFE/RL from London that in this context, the IMF and World Bank's continued insistence on the unquestioned benefits of privatization in poor countries can sometimes do more harm than good. Aside from agriculture, she cites the example of basic public services, where privatization has often brought higher costs and few tangible benefits to ordinary people.

"The IMF and the World Bank are still funding a very large proportion of countries' budgets and they have huge power over those countries. And we think that they continue to abuse that power. In particular, the IMF and the World Bank are using their aid to push unproven economic reforms such as the privatization of basic services. And these reforms simply aren't delivering for poor people," Greenhill says.

Action Aid and other development organizations object to the World Bank and IMF's tendency to impose conditions on lender countries which may not suit local conditions.

"The key point is that there's no 'one-size-fits-all' policy. Each country must be free to develop their own policies, based on their own needs. And the IMF and the World Bank at the moment are simply not allowing them to do that," Greenhill says.

In her experience, Greenhill says, increasing funding for big-ticket development projects can yield disappointing results. Much more effective means of combating poverty, especially in the poorest countries, are found through programs such as micro-loans and other targeted programs, which larger institutions such as the World Bank and IMF are poorly suited to administer.

"The incentives in the World Bank and the IMF are very much about getting the money out of the door. They'd much rather give a $150 million loan than a $10 million loan. But actually, when it comes down to it, these very large projects often simply don't deliver. What is needed is very much local-level, community-driven initiatives -- and the IMF and the World Bank simply aren't set up to meet that need," Greenhill says.