Bank loan

Who benefits from the World Bank’s $157 million loan?

Dear President David Malpass:

The public would want to know why the World Bank serves as Liberia’s economic adviser and at the same time serves as Liberia’s largest creditor of money. The Bank should focus on making profits by lending money to poor countries and abandon its original 1945 vision to fight poverty, disease and ignorance.

This suggestion that the Bank should focus on profit is not new; others offered similar views. For example, Bank employees had advised Dr. Jim Young Kim, the former World Bank President, to focus on profit or return to the World Health Organization (WHO), where the fight against poverty is the priority, according to Mr. Andrew Rice. (www.foreignpolicy.com). In his article titled “Is Jim Kim destroying the World Bank or saving it from itself”, Mr. Rice said that some employees had advised the former president of the World Bank, from 2012 to 2019, to leave the World Bank and return to the United Nations World Health Organization (WHO). Dr Kim, who was director of the WHO HIV/AIDS department from 2003 to 2005, was “…a vocal critic of the Bank, and also blamed the World Bank”…for the economic difficulties in many countries like Peru, his home country, Rice said.

Many critics of the World Bank, relying on empirical evidence, have said that the economic policies of the World Bank and its subsidiaries, in many cases, do not benefit its clients. The operational evaluation conducted by the World Bank’s Operations Evaluation Department in 1999 is a good example. The author of the study found at this link (www.inweb90.worldbank.org) concluded that non-governmental agencies belonging to the World Bank had an unsatisfactory rate of 33% when governments financed projects financed by money borrowed from the World Bank.

Where are the anti-poverty policies in Liberia, if the World Band implemented the recommendations of its internal division? Liberia continues to import food and, at the same time, investors in cash crops (rubber, oil palm, etc.) are driving people off their farmlands. Or how come Liberia’s Economic Advisor (W/B) did not encourage Firestone (ie established in 1926) to finance public savings until 2006? Or how come the W/B didn’t help Liberia use $5 billion from donors to fund social programs, according to the Liberian Citizens’ Guide to Fiscal Times; 2012/13 to 2018/19? Would the World Bank give prudent advice if it was not involved in the money lending industry?

Business creates relationships, and some relationships can work against weaker parties. And in most cases, the influential party dictates who wins and who loses. In the case of the World Bank, big business has the influence. He owned 82% of the total assets of the International Bank for Reconstruction and Development (IBRD), one of the five subsidiaries of the World Bank, according to page #14 of the 2020 IBRD audited financial statements, played a role. Certainly, Liberia, with good guidance, could have used the US$5 billion to finance different industries such as food production, education, health, etc. dividends from the country’s natural resources. Unfortunately, big business dictates World Bank policy and, by extension, Liberian policy.

Supporting or lending money to corrupt governments is an economic arrangement that big business uses to manipulate poor countries. For example, large corporations welcome or embrace corrupt officials since stolen and/or mismanaged money must be replaced. For example, the Daily Observer-Liberia editorial implied, in June 2021, that the World Bank had approved a US$157 million loan to Liberia for profit. It makes more profits by discouraging the government from playing a limited role in the management of its natural resources; and it gains more profits when corrupt bureaucrats don’t use the revenue to improve programs, but rather acquire personal wealth.

The public wonders how Liberia racked up $1.5 billion in debt when lenders canceled $4.7 billion in debt in 2010. That’s a question since donors gave Liberia about $5 billion in debt. dollars from 2012/13 to 2018/19. However, the World Bank can help Liberia fight poverty, disease and ignorance if it is not a de facto subsidiary of big business. Stopping borrowing money from big business and lending money to poor countries should be the start of getting the right policies in place. I recommend that the Bank consider and reconsider the following items below even if it were to recuse itself from lending activities:

  1. That the Bank advises Liberia to share revenues from its natural resources to generate cash to finance social programs as governments in Angola, Algeria, Botswana, Nigeria, Germany, Japan, etc. are doing. Countries that relinquish 100% ownership and management of their natural resources to multinationals could end up depending on loans to finance their budgets. For example, many African countries that institute this type of economic arrangement usually get miniscule revenues because the profit-based tax is calculated after questionable deductions such as administrative expenses, royalties, management fees, etc.

In fact, the African Union’s Committee on Illicit Financial Flows, headed by former South African President, Mr. Thabo Mbeki, has stated that multinational corporations are responsible for 95% of the US$60 billion stolen from Africa every year, according to the 2014 survey. In the case of Liberia, our government granted 66 out of 68 fraudulent concession agreements, according to the 2014 investigation concluded by European-based forensic audit firm Moore Stephens. International

If Liberia and the World Bank continue to do business as usual, the debt picture might not be different from the country’s debts of $4.7 billion, which donors wrote off in 2010.

The total debt was US$2 billion in 1989 when the civil war started, but it rose to US$4.7 in 2010. Why is that? The interest payment was high. For example, the banks’ principal was US$713 million, while interest was US$1.7 billion, according to page 47 of the CBL’s 2017 annual reports. For Nigeria, the interest and other charges were extranormal, according to the New York Times. The author said that “…Nigeria borrowed the US$5 billion, paid the US$16 billion and still owed the US$32 billion,” said Mr. Victor Oguejiofor Okafor, Ph. D. (www.laits.utexas.edu).

  1. That the Bank end its function as owner of non-governmental agencies, according to the Global Policy Forum. (www.globalpolicy.org/component/content/article/177-un/31512-the-world-bank-a-ngos.html). The Global Policy Forum said the Bank not only uses its power and money to significantly influence the activities of non-Bank NGOs, but “…it can cause rifts among non-Bank NGO coalitions” .
  2. Finally, Liberia should end the practice of adding special drawing rights (SDRs) in cash and held by the Liberian government, thereby encouraging officials and third parties to believe that the country has good cash positions. For example, while Liberia was indebted to commercial banks by $260 million in 2016, President Ellen Johnson Sirleaf reported that Liberia had $153 million of excess cash in reserve. Page # XV of the Central Bank’s 2009 Annual Report that Liberia’s cash surplus increased from $49.6 million in 2008 to $269 million in 2009.

IBRD 2020 AUDITED FINANCIAL STATEMENTS

https://thedocs.worldbank.org/en/doc/521601597072122154-0340022020/original/IBRDFinancialStatementsJune2020.pdf

Thank you in advance for your understanding.

J. Yanqui Zaza

New York State Certified Public Accountant (NYS CPA)

Phone : +231-776491322 Email: [email protected]

VOA Paynesville, Liberia