World Bank’s and International Monetary Fund’s Effects

This essay will argue that the effect of the World Bank (WB) and International Monetary Fund (IMF), on countries living in poverty, is less and their policies had done more harm than good.

The reason behind the creation of the World Bank and the International Monetary Fund after World War II was to help the world countries to avoid economic disaster. They supply money to the member governments to overcome economic problems. The article- ‘How the IMF Helps Poor Countries’ makes clear that the aim of IMF is to provide policy advice, technical assistance, and financial support. “The IMF provides low-income countries with policy advice, technical assistance, and financial support. Low-income countries receive more than half of the technical assistance provided by the Fund.” (How the IMF helps poor countries, 2007). But, the Standard Adjustment Policy of IMF towards the debtor countries is the easiest way for the privatization of the public utilities and public industries. IMF and WB are empowered by the G-7 countries, which are considered as the most powerful, developed, and industrialized countries in the world. Kenya, the African country is selected to examine and evaluate the effects of funds received from WB/IMF.

The arguments are 1. WB/IMF funding did not result in any positive impact on the health care sector of Kenya, 2. The rate of inflation is increasing year by year in Kenya, and 3. Funding by WB/IMF is unable to reduce the rate of people under poverty in Kenya.

The first argument is that WB/IMF funding did not result in any positive impact on the health care sector of Kenya. Soren Ambrose makes clear the credibility of this argument by stating that there is a reduction in life expectancy among the people of Kenya, there is an increase in infant mortality, there is an increase among the rate of children with stunted growth and the rate of vaccination among the children is highly increasing. “Life expectancy declined from 57 in 1986 to 47 in 2000; infant mortality increased from 62 per thousand in 1993 to 78 per thousand in 2003; and under-five mortality rose from 96 per thousand births to 114 per thousand in the same period.” (Ambrose). Soren Ambrose points out that IMF is totally responsible for the highly critical situation in the health sector of Kenya. He further argues that the institution’s obsession with low inflation rates is behind the starvation of the Kenyan economy and it hurts the poor. The standard adjustment policies that are imposed on the poor countries play the most important role in the privatization of public utilities and public industries of that country. It also forces the debtor country to cut back on spending on health and education to ensure the smooth repayment of the loan. One can see that the Kenyan health sector is badly affected by the SAP policy of WB/IMF. The policies of IMF, especially the low inflation rates and wage expenditure are illogical. There controls over the democracy of the borrowing governments must be re-examined. To maintain low inflation rates, the focus is set on export crops, not on agriculture. This leads to deeper inequality and environmental destruction. When the people of debtor countries are in poverty, the blow on the economy is more severe.

The second argument is that the rate of inflation is increasing year by year in Kenya. The SAP policy of IMF in Kenya is behind the increasing rate of inflation. The IMF officials pressurized the Kenyan government to add employees to the government payroll and this is accomplished with the aid money. So this policy of IMF resulted in an increased rate of inflation and economic crisis. Inflation leads to deeper inequality and hinders further development. The article- How the International Monetary Fund and the World Bank Undermine Democracy and Erode Human Rights: Five Case Studies points out that the economic development aimed by WB/IMF is able to impoverish the underdeveloped countries in the third world. The economic development by these authorities helped wealthy lenders and multinational corporations in industrialized countries. “For more than 50 years, the IMF and the World Bank have advanced a form of economic “development” that prioritizes the concerns of wealthy lenders and multinational corporations in the industrialized north while neglecting the needs of the world’s poor majority.” (How the International Monetary Fund and the World Bank undermine democracy and erode human rights five case studies: Introduction, 2001).

Because of the undemocratic policies of WB/IMF, the third-world countries are under pressure and are protesting against these policies. Government officials of Kenya point out that the target must be set on inflation, and with this, due care must be imposed on public spending, especially healthcare. The government of Kenya is committed to a low rate of inflation. But the strict and undemocratic policies of WB/IMF are trying to hinder the growth of this poor but developing country in Sub-Saharan Africa. Moreover, the government of Kenya is of the opinion that the new policy of low inflation rate so as to stabilize the repayment of debt to WB/IMF is really hurting the poor people. It is evident that a very high rate of inflation, for example-(above 40 percent) can hurt the people; and the very low rate of inflation (which is below 5 percent) also is able to show the same result. This can also harm the interest of the poor because it reduces the chance for better employment and economic growth.

The third argument is that Funding by WB/IMF is unable to reduce the rate of people under poverty in Kenya. To support Kenya’s economic and structural reform program, IMF Executive Board has approved a three-year Reduction and Growth Facility (PRGF), which allows about US$ 198 million as credit. It is evident that structural reform plays a vital role to achieve stronger growth and it is helpful for the reduction of poverty. But the article-Kenya Not to Honor All IMF Conditions: President makes clear that the credit from WB/IMF is unable to stimulate the economic growth of Kenya. Moreover, it is evident that the growth rate in the year 2000 is 0.9 compared with last year (1.2). “observers here say that the arrival of the loan has not stimulated the economic growth in the East African country due to the worst drought since Kenya’s independence in 1963, and the growth rate this year is about to be 0.9 percent compared with last year’s 1.2 percent.” (World: Kenya not to honor all IMF conditions President, 2000).

For an underdeveloped/ developing country, economic development is crucial for the eradication of poverty.

The poor people are badly affected by the increased rate of unemployment because there is no social security system in Kenya to help them. This is closely associated with the fact that the fiscal program for the year 2000/01 in Kenya focuses on a few poverty reduction measures. The problem of countries like Kenya is that, once they are under external debt (say, indebted to WB/IMF) all other ways to procure money are shut and they are forced to accept the undemocratic policies like SAP(Standard Adjustment policy). Ultimately, poor countries become under a high level of debt. Moreover, WB/IMF is able to overrule the national rules of these poor countries. This is the new model of economic colonization. Privatization and globalization accelerated the exploitation of natural resources of these countries because the economy is under the control of WB/IMF. The best way for Kenya to attain gradual development is to reduce the amount of debt from WB/IMF. Kenya can attain this because it is one of the sub-Saharan Africa which reduced the amount of poverty in former years. Most of the countries in Africa are in poverty but Kenya is different and it is a developing country. So, the further development of Kenya is in the hands of innovative economic policymakers, not in the hands of WB/IMF.

It can be seen that WB/IMF aims to help the world countries to avoid economic disaster, but the end result is that it badly affected the economic growth of third world countries. The argument of this essay, whether the effect of World Bank (WB) and International Monetary Fund (IMF), on countries living in poverty, is less or their policies had done more harm than good, is closely examined and evaluated by Focusing on Kenya as the victim of debt by WB/IMF. The three arguments (impact of WB/IMF funding on health care, inflation, and poverty in Kenya) are thoroughly examined and evaluated with suitable examples. The internal problems (privatization, drought, economic crisis, power shortage, water crisis, problems in the field of primary education, public health care, etc., are not resolved yet. From this, it is evident that the economic policies of WB/IMF reduced the positive effect of economic aid. So, the effect of the World Bank (WB) and the International Monetary Fund (IMF), on countries living in poverty is less and their policies had done more harm than good.

References

Ambrose, Soren. (2006). Preserving Disorders IMF policies and Kenya’s health care crisis: The health care crisis. Global Policy Forum. 2008. Web.

How the IMF helps poor countries. (2007). International Monetary Fund. Web.

How the International Monetary Fund and the World Bank undermine democracy and erode human rights five case studies: Introduction. (2001). World Bank and IMF. 2008. Web.

World: Kenya not to honor all IMF conditions President. (2000). People’s Daily. 2008. Web.