An Inter Press Service Feature
By Pratap Chatterjee
WASHINGTON, May 25 (IPS) -- The U.S. House of Representatives
Wednesday approved a 13.6 billion dollar 1995 foreign aid bill
which suspends incremental funding for the World Bank for one year
and cuts funds to the Global Environmental Facility (GEF).
The bill, which has yet to be considered by the Senate, also
eliminates a proposed contribution to a special programme of the
International Monetary Fund (IMF) for the world's poorest
countries implementing structural adjustment programmes.
An amendment approved just before final passage of the bill will
require the U.S. Treasury to certify that the Bank, the world's
largest source of development finance, is following
recommendations made by an internal audit two years ago, before a
total of 302 million dollars in incremental funding can be
released.
The World Bank and the IMF, together lend over 30 billion
dollars a year to countries in Africa, Asia and Latin America as
well as those in eastern Europe and the former Soviet Union.
The total amount of aid provided in the bill is about 400
million dollars less than requested by the administration of
President Bill Clinton which had hoped to reverse a seven-year
trend of diminishing U.S. bilateral aid. The total is
substantially less than the 1994 package.
The big winners include, as is traditional, Israel and Egypt,
with 3.0 billion dollars and 2.1 billion dollars respectively, and
Russia and the other former Soviet states which are earmarked for
900 million dollars.
In addition, the House earmarked 790 million dollars for
development aid to sub-Saharan African, of which South Africa --
slated to receive 600 million dollars over five years -- will
receive a major chunk. Almost 80 million dollars would go to the
new Palestinian authority as a first installment in a more
ambitious multi-year aid package.
The only major cuts in bilateral aid came from accounts for
Turkey and Greece. Military aid to Turkey was cut from 453
million dollars to 365 million dollars due to lawmakers' concerns
about its human rights record. Greece's military aid was cut from
317 million dollars to 255 million dollars to protest its failure
to comply with a U.N. embargo against Serbia.
Declines in U.S. bilateral aid have focused increased attention
on the major multilateral agencies, like the Bank and the IMF,
whose influence as funding sources for much of the Third World has
grown steadily.
Many non-governmental organisation (NGOs) and activists have
argued that Bank- and Fund-supported policies have not fostered
healthy development and, in some cases, have actually worsened the
plight of the poor and harmed the environment.
As originally proposed by the administration, the aid bill
included 100 million dollars for the IMF's second Enhanced
Structural Adjustment Facility,
1.25 billion dollars for the Bank's concessional arm, the
International Development Association (IDA), and 88.7 million
dollars for the Bank's private sector arm, the International
Finance Corporation (IFC).
It also proposed a 100 million dollar contribution to the
Bank-based GEF, which gives money to poor countries for projects
that reduce global environmental problems, such as global warming.
The GEF is co-managed by the Bank, and the U.N. Development and
Environment Programmes.
Last week, the powerful chairman of the House Appropriations
Committee, Wisconsin Democrat David Obey, proposed cutting all the
money to the IMF's ESAF and making much smaller cuts for IDA, the
IFC, and the GEF to 1.235 billion dollars, 68 billion dollars, and
98 million dollars, respectively.
The elimination of ESAF was said by aides to be due to Obey's
unhappiness with the IMF's secrecy and his belief that its
structural adjustment programmes were too hard on the poor.
This week, John Kasich, a Republican from Ohio, surprised
everybody by proposing to suspend some of the funds for the World
Bank subject to proof that the Bank is implementing the reforms
proposed by the Wapenhans audit conducted two years ago. The
audit was named after its author, a former senior Bank official,
Willi Wapenhans.
Kasich took the floor Wednesday armed with a variety of slides
to explain the Wapenhans report. ''The report shows that the Bank
is composed of a bunch of international bureaucrats, flying first
class and living high on the hog,'' he said.
While some of these problems had been addressed by the Bank
after pressure from Congress last year, he argued, lawmakers
needed to ensure that reforms continue. Suspending a part of U.S.
contributions to the Bank was one way to do so, he said.
U.S. Treasury officials later told IPS that Kasich's amendment,
which was passed by voice vote, would require them to suspend
until next April 1 payment of only that part of the appropriations
to each Bank agency which exceeded this year's U.S. contribution.
Thus, if the amendment survives the Senate, the Treasury can
pay 1.024 billion dollars to IDA next Oct. 1, the start of fiscal
1995, because that is what it is paying this year. It can then
pay the balance of 211 million dollars April 1 if it certifies
that the Bank is implementing the Wapenhans recommendations.
This provision would hit the GEF harder proportionately,
because Washington contributed only 30 million dollars this year,
especially after the House cut another 10 million dollars from the
98 million dollars approved by the Appropriations Committee.
That will leave 58 million dollars to be paid only after next
April 1, if the amendment becomes law.
The attack on the GEF funding split the ranks of environmental
groups, most of whom spurned Kasich's efforts this week to gain
their support. Friends of the Earth turned down an offer to
support him as did the Natural Resources Defence Council and
Conservation International, according to knowledgeable sources.
They felt he was motivated more by a right-wing desire to cut
environmental funding and development aid than by any genuine
concern about the work of the GEF, to which donor nations have
pledged two billion dollars over the coming three years.
Also stumping for support among environmental groups was Tom De
Lay, a Texas Republican, who originally proposed cutting the GEF
funds from 98 million dollars to 30 million dollars.
De Lay struck paydirt with the Environmental Defense Fund
(EDF) who refused to support his amendment, but offered him
permission to cite EDF's own critique of the GEF in his argument
on the floor.
''We believe that there are important issues raised by the
independent evaluation report of the GEF pilot phase which have
not been addressed yet, The US government should be requested to
report on how precisely these conditions have been met,'' said
EDF's Korinna Horta.
The NRDC's Jacob Scherr, however, issued a statement of
support. ''Failing to secure the full amount will jeopardise the
viability of the GEF to deal with these problems and hence the
participation of developing countries in these international
processes to protect the global environment,'' he said.
That was also a concern of the Treasury, some of whose officials
spent part of this week frantically telephoning around Washington
DC to get groups to oppose the cuts.
A compromise was finally struck by Obey who stepped into the
breach to suggest that DeLay's proposal be altered to cut GEF
funding by 10 million dollars to 88 million. This was accepted by
voice vote.
Treasury officials reached by IPS professed that they were
unperturbed by the changes. ''We will work with Congress to
monitor the reform process,'' said the spokesperson.
(ENDS/IPS/PC/JL/94)