The International Monetary Fund (IMF) and World Bank were created at a conference in Bretton Woods, New Hampshire, the United States in July 1944. According to official records, the institutions were founded to implement policies that constantly evolve to respond to the economic challenges facing Europe and America.
To create a framework for economic cooperation that would rebuild the economy of the West after World War II, the institutions were empowered to project and implement international policies.
Critics who do not favour the role of the Bretton Woods Institution in Africa argue that the organizations do not have Africa’s interests at heart, but offer loans to African nations in return for privatized economies, access to raw materials and markets. In his 1997 Journal of African Research & Development publication, D. Moore-Sieray writes that the Bretton Woods Institutions operate a “self-deceiving state in Africa and contribute to poverty in the continent through policies of international finance capital and blunted vision.”
To achieve their principal aim of rebuilding western economies, the Bretton Institutions began offering loans to poor countries. The loans were approved only after the receiving countries agreed to privatize their economies and allow western corporations to penetrate markets. Many financial analysts ascertain that this was a conscious poverty trap, which African nations failed to foresee.
Within a few years, Africa became highly indebted to the World Bank and IMF, and this threw the continent into a vicious circle of poverty. Like in the colonial era, western corporations have continued to enrich their countries at the expense of poor African nations.
Unsurprisingly, Africa’s indebtedness to the West continues to increase year after year despite the increased revenue generated internally across the continent. The total external debt for sub-Saharan Africa jumped nearly 150% to $583 billion in 2018 from $236 billion 10 years earlier, according to World Bank data, and the average public debt increased from 2010-2018 by 40% to 59% of GDP.
In recent times, the West has extended its channels into the World Trade Organization (WTO) and the African Development Bank (AfDB) - not many are aware that the African Development Bank is controlled by the West. The president of the AfDB, Akinwumi Adesina is currently in the news after the U.S and France called for an independent investigation over allegations of favoritism. The U.S. which owns the second-largest voting power in the AfDB rejected the initial reports of the investigation which cleared the president of any wrongdoing.
The top 3 countries with the highest voting power in the African Development Bank are Nigeria, the United States, and Japan – with the U.S and Japan holding a joint voting power percentage of 12.057 against Nigeria’s 9.281 - critics believe this speaks volume.
In its report titled How the World Bank and IMF destroy Africa; published by Africa W, a popular scenario evident across African nations was highlighted. Using Ghana as an example, the report exposed how the World Bank and IMF control resources and markets of poor countries by baiting them to accept loans for purchase rather than investing in their countries.
Ghana once boasted of prosperous rice farming communities and farmers received subsidies to enable them to produce rice on a large scale and cater to the demands of the citizens.
However, the World Bank and the IMF stepped in and told the government they would not approve any more loans for Ghana unless the government cut the farming subsidies it was providing to the poor rice farmers.
As expected, for Ghana to continue its loan obligations, the government had to cut subsidies, and this affected the farmers and producers. Soon, Ghana started taking more loans to import rice from western countries such as the United States (a major partner of the World Bank and the IMF).
In the long run, Ghana owes the World Bank and the IMF huge amounts of money, but the money borrowed goes back to the West because Ghana had to use the loan to import food. This way, there is a demand for Western products which in turn promotes employment and economic progress in their countries.
Whereas, with an enabling environment and government’s support, Ghana – like every other African country, can adequately feed itself without the need to import food. The situation is a win-win for the West, while African nations are further plunged into poverty.
Sadly, the case is the same across the continent. It is not a coincidence that despite the increased aid from the World Bank and IMF, the average poverty rate for sub-Saharan Africa stands at about 41 percent, and of the world's 28 poorest countries, 27 are in sub-Saharan Africa - all with a poverty rate above 30 percent.
The increased poverty metrics in Africa despite the purported roles of these organizations give credit to the arguments that they are tools of neo-colonialism put in place to control Africa’s wealth. What are your thoughts?