The global financial crisis still looms. In recent years, many observers have been obsessed with real consequences in terms of financial but also the financial turmoil of 2008-2009, both in developed countries than in developing countries. The additional BWI, ODA among the main tracks progress to mitigate the impact of the crisis in PED.Si the question of the ODA is still pending, and depends on the willingness of leaders rich countries of the north (the ODA represents only a mere 100 billion dollars annually since 2005), that relating to BWI deserves particularly having regard to politico-economic they have with many developing countries for decades. But the question remains, what does it really net financial inflows BWI in these countries in the past so that we can imagine the effectiveness of this measure?
is the purpose of this article, the fruit of my humble thoughts and analysis, of course not immune from criticism.
ENJOY ALL OF YOU AND I apologize for the imperfections!!
FINANCIAL FLOWS OF THE BRETTON WOODS INSTITUTIONS IN DEVELOPING COUNTRIES: MYTH OR REALITY?
BWI Financial contributions have changed over time following the economic context of each country. If the IMF has been closely involved in macroeconomic stabilization, the financing of the balance of payments and financial sector restructuring, the World Bank has opted to finance much of the structural programs to promote development.
1. Financial Flows IMF
As well noted Lelart Michel [2007, p. 34] in his work entitled "The International Monetary System: the Role of the IMF was to provide member countries with the means to intervene in markets to support its currency and not require them to maintain or establish restrictions. It is through various funding mechanisms for troubled countries that the IMF will try to fulfill its role as guarantor of the international monetary and financial stability.
The IMF financial assistance for countries seeking assistance has evolved over time according to current programs. The operation of the IMF is generally based on the share. On the one hand, the share which determines the amount authorized for disbursement in each country. On the other hand, is still the portion that determines voting rights. In poor countries, the SAF and ESAF 1980s has been replaced by the PRGF from 1999, while emerging markets have benefited from funding through the Stand By Agreement or the SBA. The evolution and volume of funding have evolved depending on the level of development, financing needs but also attended to the quality of relationships with that country. Until 1986, the Fund provides support to the poorest countries through its traditional instruments. Between 1974 and 1979, in response to the first oil shock, only eight SBAs and expanded facilities are approved. Between 1980 and 1984, following the second oil shock and the foreign debt problems of developing countries, the IMF approved 27 SBA and extended facilities. Traditional instruments of the IMF, however, fail to reduce imbalances in these countries. The use of the SBA, whose duration is normally one year, has been criticized for their short duration. To cope, the IMF introduced a new credit facility for the poorest countries in March 1986, called Structural Adjustment Facility (SAF) to support programs lasting three years. These are the countries eligible for loans from the International Development (IDA, a subsidiary of the World Bank) who are eligible for these loans. These loans are repayable over ten years and their interest rate is only 0.5%. In mid 1987, the IMF introduced the SAF (ESAF), in amounts five times higher than those of FAS, with funding budget of France, Japan and other industrialized countries. [Patrick Lenain, 2004].
This program will continue until September 1999 with the establishment of the Facility for Poverty Reduction and Growth Facility (PRGF). The IMF has paid good money to support the SAF and ESAF. At 30 April 1998, 6.4 billion SDR ($ 8.6 billion) was disbursed under the 71 ESAF arrangements that benefited 48 countries and 1.8 billion SDR ($ 2.4 billion) under agreements FAS. Contrary to poor countries, emerging countries have benefited from special treatment from the IMF and World Bank in managing the debt crisis. Not only do these countries constitute the bulk of the country suspended payments, but they occupy an important place in the starting of the global economy. The IMF, in particular, face this crisis, created the stand-by credit for them. The standby credit is a special window of the IMF intended primarily to emerging markets so they can solve their problem of balance of payments but also ease the debt repayment. In addition to credit, they can still receive credit for the SBA (usual mechanism) or the expanded agreement (in case of large financial problem).
For example, in 1982 Mexico obtained an agreement extended over three years for a total of 3.6 billion SDR in 1983 Argentina gets SBA and compensatory financing for a total of 2 billion SDRs, Brazil obtained an agreement extended for a total of 5 billion SDRs.
In general, the net borrowing from the IMF for developing countries, was not as stable as we think. The volume of net borrowing from the IMF for developing countries rose from 14.1 to -10700000000 U.S. dollars from 1998 to 2000 respectively and 14--25100000000 U.S. dollars from 2002 to 2006.
The downward trend (or even negative) since 2004 is attributed to early loan repayments in emerging countries. The regional analysis reflects the small share of Sub-Saharan Africa, the Middle East and North Africa, the South Asia in the activity of the IMF. The weakness of the volume of net borrowing (Positive or negative) corroborates this finding. By cons, its presence in the regions of Latin America and the Caribbean, Europe and Central Asia, East Asia and Pacific region is remarkable. The negative sign of the volume of net borrowing recorded in these regions since 2004 reflects the fact that developing countries have not benefited from the net borrowing from the IMF. Instead, the IMF loans far exceed the reimbursements, which is the origin of this negative net flows recorded since 2004.
In short, the net borrowing from the IMF has been remarkable in 1998, 2001, 2002, cons, it was low in 1999 2003, negative since 2004. This observation slice widely expressed strongly developed by neoliberal economists that the IMF plays a crucial role in the financing of developing countries. Instead, as has been the case since 2004, are developing countries that fund the IMF, whether poor or not.
But the future financial strength of the IMF has been questioned lately. The reluctance of emerging countries like Brazil, Argentina, caution following the Asian crisis of 1997, socio-economic disturbances caused by the PAS applied are the main parameters explain the likely future of the IMF crisis. In May 2006 the former Director General of the IMF, Mr. Rodrigo de Rato has appointed a committee of eminent persons to study the financing of the IMF. The committee's report, presented to the Board and published in January 2007 concluded that the current funding of the IMF, that the institution's income comes mainly from the interest it charges on its loans, was not appropriate because of the great diversity of its functions and powers. The committee recommended a new set of measures, including development of investment activities and the relaxation of rules on the subject, creating an endowment through the sale of a limited amount of IMF gold stocks, and billing services provided to member countries. At its April 2007 meeting, the IMFC said the committee's report provided "a solid starting point for further work towards the development of a new model aimed at broadening the revenue base" . The Board has initiated discussions on a funding formula that can garner broad support among the IMF member countries [IMF, 2007, p18]. At the end of fiscal 2007 (April 30, 2007), the outstanding IMF credit had fallen to 7.3 billion SDRs, against 19.2 billion in April 2006 (The outstanding loans were 100 billion U.S. dollar in 2003) because of continued prepayments and small-scale new disbursements. The new IMF commitments fell sharply: they went down to 237 million SDR in fiscal 2007, against SDR 8.3 billion during the previous year (2006), two new stand-by arrangements have been approved for the Paraguay and Peru. Seven agreements confirming or expanded agreements were in force at year end, four of which are considered as having been concluded as a precaution, borrowers who have expressed their intention not to use them. In late April 2007, the undrawn balances under stand-by arrangements or agreements in force was expanded from 3.9 billion SDRs [IMF, 2007, p39].
In recent years, many developing countries especially emerging countries benefiting from the healthy economy but also judging the IMF conditionalities too hard, tried to circumvent this institution through the early repayment of debt vis-à-vis this institution. The total refund loans in these countries vis-à-vis the IMF has reached a staggering $ 28 billion U.S. dollars in 2006 against $ 44 billion in 2005. For example, in 2006 Argentina paid U.S. $ 9 billion of its debt to the IMF, U.S. $ 8 billion for Indonesia, 7.5 billion U.S. dollars to Turkey, 2 5 billion for Uruguay. These payments early repayment and / or full repayment of the debt of these countries (Venezuela) vis-à-vis the IMF restore them some autonomy in the conduct of fiscal policy and thus regain their financial independence with pride long scorned by BWI conditionalities. For cons, the poor countries of the prisoners stagnant economy and lack of viable alternative remain highly dependent on IMF financing through different mechanisms related to PRGF and conditionalities for HIPC and MDRI conducted jointly with the World Bank. According to Michel Lelart [2007, p.81] at April 30, 2006, aid from the fund reached 328 billion SDR 482 billion U.S. dollars. This is the total number of drawings made for nearly sixty years by all member countries. The fund's role became more qualitative than quantitative especially now that countries repay more than they borrow it, especially since 2004.Voilà how financial dependence of developing countries to the IMF is being challenged in recent years. This does not stop many of them are still largely dependent on its funding still remains a drop in the bucket compared to their financial needs.
If this was the case of financial contributions from the IMF, what about the World Bank?
2. Financial contributions from the World Bank
The World Bank is the international body which supports the funding for many developing countries. In the SAP years 1980, and until the late 1990s, poor countries could use to finance the Structural Adjustment Credit (SAC) through the financing of IDA (World Bank affiliate). From 1999-2000 they used the credit for the PRSP continues to be funded by IDA. Emerging countries have in turn received funding from the IBRD (World Bank subsidiary). The two groups of countries can also use IFC financing (International Finance Corporation) and the Multilateral Investment Guarantee Agency (MIGA). With its resources, the World Bank has some financial flexibility from the IMF. Regular volume of funding is well above the volume of credit granted by the IMF, especially in poor countries.
Overall, loans from the World Bank for developing countries recorded an upward trend from 2004 after a lull between 2003 and 2004. These loans have gone so 19519.5 to 20,079,800,000 U.S. dollars from 2002 to 2004 and U.S. $ 24,195,800,000 in 2007. Sub-Saharan Africa, these loans have increased from 3793.5 to 4,115,900,000,000 U.S. dollars from 2002 to 2004 and 5.7969 trillion in 2007. This significant increase recorded since 2005 marks the strong presence of the World Bank in this sub-region of Africa. Middle East and North Africa, the sharp increase in lending recorded until 2006 was discontinued in 2007. By cons, in contrast to Africa, other regions are marked by a period of instability loans.
The regional distribution of loans from the World Bank is marked by a predominance and stability of quasi-Saharan Africa, Latin America and Caribbean, East Asia. The dominance of Europe and Central Asia, which marks the period 2002-2003 was reversed from 2004 for Sub-Saharan Africa, Latin America and the Caribbean. Finally, it is obvious that the Middle East and North Africa occupy only a small proportion of loans from the World Bank.
It is important to remember that the main funding from the World Bank is done either by the IDA funding primarily for poor countries, either through IBRD financing, prerogative of emerging and / or middle-income countries ( MICs).
The IDA financing is marked by the preponderance of Africa that has absorbed a loan volume of around 5.8 dollars for fiscal 2007, representing 49% of total IDA commitments. South Asia with a financing volume estimated at U.S. $ 4 billion (34%) comes second, followed by East Asia and the Pacific that benefit from 1.2 billion U.S. funding (10 % of total). The Middle East and North Africa, Latin America and the Caribbean accounted for 2% of all IDA funding in 2007 [World Bank, 2007]. It is also important to note that the main beneficiaries of funding were India (2.3 billion dollars), Pakistan ($ 0.9 billion) and Nigeria (0.8 billion). The IBRD commitments are marked by dominance, a dominance of emerging markets. The majority of IBRD loans went to Latin America and Caribbean Region, with 4.4 billion (or 34% of the volume of IBRD). According to the World Bank [2007], the Europe and Central Asia was ranked second with 3.3 billion of funding (26%), followed in third place by the East Asia Region and Pacific with $ 2.8 billion (22%). While the five largest borrowers IBRD, namely Argentina, China, India, Turkey and Colombia, have received 52% of the total volume of loans granted by the institution during the year 2006, they accounted for 56% of the amount total IBRD commitments in fiscal 2007.
But this analysis based on changes in gross loans from the World Bank face a truth that contrasts greatly with the usual speeches BWI. Indeed, these flows of gross loans do not include repayment of loans in developing countries. It is quite normal then to integrate these repayments if you really want to understand the effectiveness of Actual financing (net borrowing) of the World Bank in developing countries. In terms
overall, the net financing from the World Bank for developing countries was higher between 1998 and 2001, respectively from 8.7 to 7.5 billion U.S. dollars. This means that during this period, the World Bank has provided more funding than debt repayment by developing countries. This trend reversed from 2002 with a volume of negative net funding continues through 2006. Thus, the net financing from the World Bank for developing countries rose from -0.2 to -2400000000 U.S. dollars from 2002 to 2006.
analysis at regional shows that Africa enjoys a positive net volume of funding throughout the period, respectively from 1.3 to 2.2 billion U.S. dollars from 1998 to 2002 and 1.8 billion U.S. in 2006 . For cons, the Middle East and North Africa, the net flow of financing from the World Bank was always negative (or zero in 2005) to go from -0.2 to -0900000000 U.S. $ 1998 2006. In other regions, developing countries do not show a clear trend and remarkable activity of the World Bank. One can still see that in general until 2001, they showed a positive net flow of funds, a situation which is deteriorating from 2002 onwards.
Unlike the IMF, the World Bank does not yet indicate a problem of liquidity. The generosity of these resources and the financial health of its subsidiaries (to the detriment of the DCs) are the main causes of the financial soundness of the World Bank. In 2006, following the lead to other major emerging economies, Mexico has agreed to pay 9 billion of its debt vis-à-vis the World Bank. By making this early repayment, Mexico, like other emerging markets, also wants to take a certain distance vis-à-vis World Bank and IMF.
3. Financial flows across BWI
The previous analysis allowed us to understand the financial contributions of BWI (IMF and World Bank) separately. This analysis was crucial in that it allowed us to assess the individual contributions of these two institutions. But the complexity and the existing cooperation between the two institutions are pushing us to insert in the same gutter.
We can see that the net financing BWI for developing countries as a whole has been negative since 2004. Sub-Saharan Africa shows a net flow of funds positive during the period respectively from 1 to 2.7 billion U.S. dollars from 1998 to 2002 and 1.9 billion U.S. dollars in 2006. The Middle East (except in 1999) has always had a negative net financial flows respectively from -0.2 to -1000000000 U.S. dollars from 1998 to 2006. In South Asia, the net financing of IBW increased respectively from 0.4 to 1.7 billion U.S. dollars in 1998 and 2006. Latin America and the Caribbean, it rose from 4.9 billion U.S. dollars in 1998 to -15300000000 2006. In Europe and Central Asia was U.S. $ 6.8 billion in 1998 and -5.3 in 2006. Finally in East Asia and Pacific the net flow rose 9.8 0 -9.4 billion U.S. dollars from 1998 to 2006.
Saharan Africa has consistently registered a positive net financial flows. We see that from the year 2004 most of these sub-regions of the developing countries recorded a negative flow of funds BWI. This is the case of Latin America, Europe and Central Asia, East Asia and the Pacific. South Asia has always displayed a positive net financial flows (except in 2003). For cons, the Middle East and North Africa have recorded a negative net financing (except in 1999).
flow financing net negative (and vice versa) reflects the fact that the amount of loan repayment of these countries vis-à-vis the IBW exceeded the volume of loans granted by these two institutions for a given period (year here). This reflects a degree of financial independence of these countries vis-à-vis the BWI. Ensuring repayment of their debts vis-à-vis the BWI, the developing countries that generate a negative net financial flows are considered as countries which already have some form of financial independence vis-à-vis the BWI.
recent years (since 2004), developing countries as a whole, America Latin Europe and Central Asia, East Asia, Eastern and Pacific, Middle East and North Africa, showing a negative net financial flows from BWI can be considered independent of the less financially BWI. By cons, Sub-Saharan Africa and South Asia, with a positive net financial flows from 1998 to 2006 show some form of financial dependency vis-à-vis BWI
Despite this trend towards financial independence in some regions (countries) in developing countries, past experience shows that most of them have asked a prolonged financial assistance from BWI. Here we start from the financial assistance to financial assistantship.
4. Controversy between assistantship or financial assistance
Appeals extended loans BWI is undoubtedly the simplest form that characterizes the financial dependence of a country vis-à-vis the BWI. By regularly calling on financial assistance from BWI, the country in question is no longer in a situation of temporary financial assistance (economic) but passes through a stage of structural financial assistance. The imbalance chronic financial sector (public finance) and its external position (balance of payments, external debt) and the stagnation of its economy to encourage these countries regularly seek assistance from BWI because viable alternative. These loans extended use BWI mainly explained by the underdevelopment of the domestic financial sector, the institutional problem, the lack of other sources of external financing.
During the period 1971-2000, 51 out of 128 countries were borrowers of prolonged users of IMF loan. The prolonged use
supported programs BWI raise issues that are central to recent controversies regarding the role of these institutions in the country who need a longer adjustment period. In the case of the IMF, some critics believe that prolonged use is a breach of the traditional mission of IMF is to support a temporary balance of payments and led to believe that the IMF-supported programs are not effective. Other observers believe that the frequent use of IMF credits can be justified in countries whose adjustment problems are deeply endemic and is fully compatible with the IMF mission.
A country such as Madagascar for example, is primarily and regularly funded from outside. Since 1997, the investment budget of this country was funded at 70% off (World Bank, IMF, ADB, European Union) without regard to public and private flows relating to NGOs, humanitarian, etc.. Tax revenues are used only to then fund the operating budget (approximately (55% of total budget) and a capital budget (45% of total budget), even though the country needs funding to boost its economy and to eradicate poverty which still affects 75% Population in 2006 [World Bank, 2008]. The promise of MAP (Madagascar Action Plan) under roughly the roadmaps of the second mandate (2007-2012) Marc Ravalomanana (former chairman since March 2009) offers hope to the population of developing long marked by total despair, although funding has yet to find with regular partners (rich countries, BWI, European Union). The three phases of structural adjustment in effect i) FAS IMF and World Bank CAS 1980s; ii) the PFP I (1996-1999) and the PFP II (1999-2001), iii) PRGF IMF from 2001 to present (with the new agreement July 2006) and the World Bank PRSP (1999-2006), have almost nothing given to Madagascar's development and economic performance despite the economic growth of around 4.5% of GDP 1997 to 2006 (with the exception of 2002 characterized by post-election crisis that has caused a decline of -10% of GDP). Pepe Andrianomanana [2001] in his study in collaboration with Harvard University on behalf of the USAID-Madagascar was able to dissect a way summarizes the strengths and weaknesses of the financial sector of this country. The recommendations in this study were able to reform the financial system Malagasy with mixed results given the reluctance of leaders to adopt measures that could destabilize the institutional barriers and the seizure of BWI. The various successive programs in partnership with IBW did not prevent the Big Island to be ranked 146th out of 177 in 2005 global human development index showing a development of about 0.49 and a GNP per capita of about $ 280 for a year [UNDP Human Development Report 2005]. Is a way of saying that Madagascar has never needed (never needed) BWI? Can we move forward in the current context, the abandonment of IBW is not a good thing for Madagascar because it will always need these two institutions, only for its image vis-à-vis the creditor (s 'there is really who will be interested, apart from the industrial free zone attracted by the low cost of local labor). The European Union through the EDF (European Development Fund) remains the second largest donor in the country (after the World Bank) with an average annual contribution of 80 million Euros from 1999 to 2007. The 10th EDF, a program estimated funding to the tune of 462 million euros for 2008-2013 reflects the satisfaction of the European Union in terms of economic performance. It is therefore a logical extension of the 9th EDF (completed 2007), the actual disbursement is estimated at 447 million euros. World Bank (first donor) for its acts to the tune of 140 million euros annually since 1997. The domestic resource mobilization remains a promising alternative to the failures of past economic policies under the aegis of BWI. Indeed, the Bank World itself believes that nothing that mineral resources (precious stones, gold), about 150 million U.S. dollars each year to escape the credit of the state while the PRGF (2001-2005) IMF (already divided into three slices) was only of about 100 million U.S. dollars. The debt cancellation under the HIPC initiative which has benefited the country pushed down its debt of 4.3 billion U.S. dollars before the decision point (circa 2001) to 1.5 billion dollars in 2007 (about 90 dollars per citizen Madagascar) as measured on the successive cancellation completion point (late 2005). These measures of debt cancellation, because of their purely accounting, could not influence significantly the lives of the people to whom they were intended. The situation was even worse because they led to a drastic reduction of actual transfers BWI and rich countries. The majority of countries in sub-Saharan Africa (except South Africa, Botswana, Mauritius, Seychelles, Gabon) have the same configuration as Madagascar. However they differ from each other in their economic structure, their political system and institutional frameworks in place.
Generally, it appears that the prolonged use of IBW is becoming a chronic problem, because few countries are able to give it up. This is explained by the fact that users generally face persistent imbalances more marked and more deeply rooted problems that other countries which receive assistance from BWI. However, these characteristics do not necessarily lead to prolonged use, especially if they are taken into account in the design of adjustment programs. A
thing is for sure, use extended loans BWI countries are plaintiffs in a form of financial assistantship is both the causes and effects of economic stagnation in these countries. This kind of financial assistantship regularly brings the leaders of these countries in some form of fiscal laxity at the expense of the population through debt and conditionalities of adjustment programs in effect.
One thing is sure, the recent financial crisis has greatly weakened the financial situation of developing countries, but it has not changed much for the report configuration political and financial relationship between DCs and BWI. Despite superficial signs of change observed at the World Bank and IMF (with Dominique Strauss-Khan of Keynesian orientation'') in recent years, the Washington consensus remains in force and will still be the founder of the doctrine in the BWI years to come.
IT MAY BE TIME TO TAKE THE PED control their destiny.
THE BALL IS IN OUR CAMP!!
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