Share this story
Close X
Switch to Desktop Site

UN agency helps the poorest of the poor. But budget cut may impair ability to help third-world entrepreneurs

Sinewy and hard-working, Rahman pulls a rickshaw between villages in overcrowded Bangladesh. He used to rent the rickshaw for a dollar a day -- but not any more. He has discovered that even though he owns no land or other bankable assets, he can actually borrow money from a new local bank. So he has swallowed hard, taken out what to him is a huge loan ($70), and bought his rickshaw outright.

His weekly payment on the loan, including interest, is $1.82 (52 equal installments), or 26 cents a day. Overnight he has become a man of business, with a solid asset. In a year the loan will be paid and, if he buys another rickshaw, he could become a local transportation tycoon.

About these ads

Rahman owes his prosperity to a new rural credit plan launched by a seven-year-old United Nations agency based in Rome that aims at helping the poorest of the poor in Asia, Africa, and Latin America.

The agency's partner in Bangladesh, the Grameen Bank, has found that 99 percent of all such loans have been paid back on time. People like Rahman are hard workers and good loan candidates.

Yet, despite 139 member states, a growing reputation, and favorable reports from the American, Canadian, and West German governments, the International Fund for Agricultural Development (IFAD) is at the point of financial crisis.

Sources in Rome and Washington report that IFAD may be able to continue with a budget cut in half -- or that it just may have to go out of business. The battle being waged among IFAD members typifies the difficulties encountered by even well-liked aid agencies at a time when the US (an IFAD member) faces huge budget deficits, some donors attach political conditions to aid, and oil producers see revenues falling along with oil prices.

IFAD now finances 164 projects of various kinds in 85 countries worth $8.6 billion. The fund has put up about $2 billion, with other donors and recipients providing the rest on a matching basis.

It is the only fund anywhere that combines rich-nation donor money with funds from the Organization of Petroleum Exporting Countries (OPEC), based in Vienna.

Set up in 1974, the fund was seen as a way of recycling some of the OPEC oil profits generated since 1973 into third-world development. OPEC was to contribute 42 percent, and the Organization for Economic Cooperation and Development 58 percent of the overall IFAD budget.

About these ads

The fund began with initial contributions totaling (in 1984 dollars) $946.7 million. After three years, members again contributed, this time (in 1984 dollars) some $33 million less.

The big fight now is over the next contributions, due this year. Oil prices have dropped. Iran is still at war with Iraq. OPEC countries, citing economic hardship, say they must slash their contributions -- and in any case will pay only 40 percent of a new, lower budget, while the rich nations must, according to OPEC, pay 60 percent.

The rich nations now seem ready to pay 60 percent to keep IFAD afloat, even though the US Congress, prodded by right-wing Republicans Rep. Jack Kemp of New York and Sen. Jesse Helms of North Carolina, balked earlier this year.

``We were faced with budget cuts across the board, and we had to save some other programs,'' a Kemp aide said in Washington. ``We also feel that IFAD should be using its moral authority -- the fund is an opinion leader -- to make aid conditional on policy changes such as higher prices for farmers, and lower taxes.''

Administration sources told this newspaper that the Reagan administration is now ready to pay 17 percent of IFAD's overall budget provided the total US contribution is less than $150 million. The outlook is that IFAD will probably continue, at a level of around $530 million, for the next three years -- a heavy cut of about 40 percent which will mean fewer and less ambitious projects. ``We expect to pay no more than $90 million,'' says one well-informed administration source. (That figure is 17 percent o f $530 million.)

The US is asking OPEC to indicate what amount it wants to contribute. IFAD's respected president, veteran Algerian diplomat Idriss Jazairy, has obtained figures from every OPEC member of IFAD except the United Arab Emirates and Qatar.

OPEC sources in Vienna said that both the United Arab Emirates and Qatar support IFAD in principle but must ``go through procedures'' before announcing figures.

The main OPEC supporters of the fund, Saudi Arabia and Kuwait, have already told Mr. Jazairy privately what they will give. No details have been made public.

Nigeria and Venezuela, despite severe economic problems, have said they will also contribute. Nigeria has been paying so far about as much as Britain, and Kuwait as much as West Germany.

If the Emirates and Qatar respond soon, Jazairy will convene a committee meeting in November. He hopes to have the financial question resolved by the end of the year when he will begin a review of IFAD's future. ``IFAD is useful, and in the long term it can be more useful,'' a senior OPEC source said.

But OPEC's share of the world oil market had dropped from 30 million to 15 million barrels a day, the source said. The OPEC Fund, the main channel for OPEC money to the third world, had already committed loans of $1.9 billion to 82 countries, at interest rates of 4 percent chargeable over 20 years on 25 percent of the amounts loaned, with 75 percent interest-free.

Qatar, the source said, had provided 15 percent of its gross national product in loans. Venezuela, Saudi Arabia, and Iran had given more than their quota in 1981 to cover shortfalls from poorer nations. ``We've been talking about IFAD continuing with $500 million, or $700 million,'' the source said.

An opposite view comes from conservatives in Washington. They say that when OPEC raised oil prices in the 1970s they caused hardship in the third world which they are now adding to by cutting back support.

The fund's vice-president, Donald Brown, an American aid veteran, believes that IFAD's future must come under review. He hints that the 40/60 percent funding ratio between the Organization for Economic Cooperation and Development and OPEC may have to be abandoned. ``But,'' he said, ``there's a growing recognition that IFAD does have something special to offer the rural poor, and that it's worth finding extra resources in various ways.''

Some countries might agree to take up the slack left by specific countries whose contributions have slipped -- among them Iran and Libya. For instance, it is asked, would South Korea give more if moved up to ``rich donor'' status, which, under IFAD rules, would mean much more participation on the governing board?

What about countries which have not contributed at all to IFAD -- Pakistan, Yugoslavia, Malaysia, Singapore, oil-wealthy Brunei?

``Can they afford to stand aside?'' one IFAD official asks.

Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.