The Negative Impacts Of International Financial Institutions In Africa, Africa

After Zambia gained political independence their economy was doing better. Their economy was surrounded around their primary natural resource, copper. As copper sales went up, new medical buildings and schools were built, they had a promising textile industry and things were looking up. Until an unexpected rise in the price of oil in tandem with the dropping prices of copper forced Zambia to borrow from the IMF and world banks at extremely high interest rates. Soon Zambia found itself in a mountain of unpayable debts and to repay creditors, spending was cut to education and health and other infrastructure projects. Eventually all of the progress they have made goes to waste as it can not be maintained. Foreign countries currently dictate the economic policy via structural adjustment, i.e. policies that “should” increase revenue and allow them to pay the loans off. This inevitably leads to a country that is so dependent on foreign aid because their own industries have been destroyed by foreign influences.

The World Bank advances loans to member countries primarily to help them lay down the foundation of sound economic growth. The loans made by the Bank either directly or through guarantees are intended for certain specific projects of reconstruction and development in the member countries.

Whilst raising money for African charities at school I developed an interest in global inequality and alternative policies that can help low-income nations escape the poverty trap. Reading ’23 Things’ by Ha-Joon Chang, I was intrigued by his view on blaming free-market policies like SAPs that exposed sub-Saharan Africa to international competition, slowing economic growth. Hence, this extended my research to the other side of the

~ Today the bank functions as an international organization that attempts to fight poverty by offering developmental assistance to middle and poor-income countries. By giving loans, and offering advice and training in both the private and public sectors, the World Bank aims to eliminate poverty by helping people

The large cash injection would then create a “greasing the gears effect” and allow for the jumpstart of economic development. Between the years of 1948 and 1952 the U.S. granted $13 billion to revamp the European economy (Dambisa, 2009: 35). This particular method achieved great success in post-World War II Europe and was known as the Marshall Plan. Due to its effective and unquestionable success in this era, the model was applied to economic development in Africa with the confidence that the same outstanding results would ensue. However, the application of the Marshall Plan to Africa is problematic for three reasons. One, the Marshall Plan had a rigid duration period of five years while, the concessional loans and grants to Africa over the last 50 years have been unending (Dambisa, 2009: 36). Two, European institutions were already in place to receive the aid efficiently and effectively. In Africa, however, these same institutions are either non-existent or grossly ineffective due to corruption (Dambisa, 2009: 37). The vast amounts of corruption have been heavily documented. Mobutu Sese Seko, President of the Democratic Republic of the Congo from 1965 to 1997, for example, stole an equivalent of U.S. 5 billion dollars from his people (Dambisa, 2009: 48). However, even the less corrupt rulers of many African countries had few options as to what to invest the aid money on. Consequently, the bulk concessional aid goes directly into consumption without a variety of investment outlets. This process does not solve the problem but instead, allows for the cycle to continue. Lastly, three, the money from the Marshal had specific targets to repair physical infrastructure such as, roads, communications, sewage, factories, and electric systems (Dambisa, 2009: 37) In Africa today, the scope of the

In the case of the proposal to fund Brazil with dams, irrigation, power, roads, and funds to develop crops the World Bank has those funds. As a representative of the World Bank, this proposal is currently not very wise and the impact it will have on the people of Brazil will not be a positive one, and that it will not yield a great return to the World Bank unless some adjustments to the proposal are made.

Every year sub-Saharan Africa receives around $134bn in loans, foreign investment and development aid, according to the UN. Nonetheless, sub-Saharan Africa is still the poorest region in the world. For many years the international community has debated over the reasons why every year billion and billions of dollars are not taking sub-Saharan Africans out of poverty. Three major groups have prevailed in the discussion. First, the people who totally blame Africa for not doing its job right, completely forgetting that most of the funds are not administrated by Africans. Second, the people who believe that even though aids are not working, the international community should keep investing funds in Africa even if is failing; one day they will work.

Considering the fact that in 2013 the UNDP ranked Sierra Leone 183 out of 187 in terms of the Human Development Index, how have social factors such as gender inequality affected development? Questions such as these must be asked prior to diagnosing EVD as the root cause of the decimation of Sierra Leone’s economy. I believe that one reason why the Ebola epidemic has had such a catastrophic effect in West Africa is because there was no internal safety net for countries like Sierra Leone to fall back on. By safety net I am referring to a supply food and medical provisions in the case of an emergency, and a governmental institution that allocated sufficient funds to public welfare and allowed for equal opportunity of education to the most vulnerable in society. Economists and analysists also need to think progressively and ask questions that demonstrate foresight. One such question is with millions of dollars being allocated for the Ebola-affected countries like Sierra Leone, how can recreating an aid culture that slows real growth be avoided? An equally important question is how can international non-governmental organizations work with the government to strengthen the economy and cut off unlawful financial

The World Bank, created in 1944, was made to provide assistance to poverty-stricken or financially unstable countries around the world. Although it originated as an amazing idea, today the World Bank sometimes causes more harm than benefit in the countries that it intends to assist ("International Monetary Fund and World Bank," n.d.). One example of this is the Chixoy Power Project the World Bank funded in Guatemala. In 1978, the project was started " with the intent of “bringing development” to Guatemala" (Russell, 2015). However, this project leads to one of the most horrific genocides in Guatemalan history.

The world bank has the authority and ability to lend to countries, if these countries want to borrow. Borrowing from the bank is an important way for low and middle income countries to strengthen their economy as well as their overall standard of living.

In an effort to bring an end to world poverty the World Bank and IMF (International Monetary Fund) were established in 1944. Consisting of members from 44 nations “The Bank and the IMF are twin intergovernmental pillars supporting the structure of the world's economic and financial order”(Driscoll, 1996). In other words they are international economic organizations that grant loans to third world countries for development programs.

Latin America and the Caribbean countries have risen against the challenge of Poverty Reduction, and shown commendable progress with 8.5% of the population rising to the middle class level in the last decade, but 42.12% still live in the dreads of poverty. IDB via its Division of Social Protection and Health works with people who live below the poverty line or are shunned by society and aims to provide them with opportunities of education and labour. IDB-financed programs help in reducing racial and ethnic inequalities on many fronts. Poverty Reduction requires achieving and sustaining strong levels of economic growth, but that growth will be considered invalid if it does not spread out to all the sections of society. The Bank aims at improving lives of people by increasing nutrition, educational possibilities, fostering social inclusion and maintaining a long lasting and just social

Angry protesting, political upset, governments falling, privatization failing, and money lost are a few outcomes that influence the public opinion on the World Bank, and its involvement in many underdeveloped countries. While the World Bank claims that reducing poverty across the globe is its foremost priority, many opponents believe that it is responsible for increasing poverty. The World Bank is a multifaceted organization that loans money to government around the world for development.

INTRODUCTIONBackground Sub-Saharan Africa continues to present the world with its most formidable developmentchallenge. During the last two decades the number of the poor in Africa has doubled from150 million to 300 million, more than 40 percent of the region’s population. About one thirdof the region’s population lives in countries affected by or emerging from conflict. Moreover,HIV/AIDS continues to threaten African lives and livelihoods. Africa is the only region thatremains behind on most of the MDGs. On current trends it will fall far short of meeting the2015 targets, (The World Bank, 2005).Africa has come a long way in its efforts to achieve sustainable development. Lessons of thecontinent’s development over the last two decades consistently highlighted the need for moreintensive efforts to effectively address some of its major development constraints. Acombination of ineffective policies, outright mismanagement (in some countries), heavyexternal debt burden, poor governance, and conflicts precipitated the massive economicdecline in the early 1980s. The recovery in the latter half of the decade was partly due tomajor economic policy reforms as well as growing socio-political pluralism and economicstability, which were consolidated in the decade of the 1990s. Yet, much still remains to bedone, as the African continent entered the 21st century faced with numerous developmentchallenges. Some of these challenges

Most of the developing countries are mired deeply in economical obstacles, which prevent them from development significantly. In order to overcome those embarrassments world’s society struggles to find the efficient solution for poor countries’ economies. Historically, developed countries undertook policy of giving aid to their colonies, afterwards by the end of The Second World War the United States and United Nations embarked the global sponsorship to the developing countries and countries of the Third World due to humanitarian considerations. Since then many other countries have joined in the effort to provide financial aid to lesser developed or poverty ridden countries. But none of those countries that received an aid had experienced a prosperity phase and rapid economic growth.