Share this story
Close X
Switch to Desktop Site

'Soft' Loans Mean Better Government for Africa

Congress should honor its commitment to the World Bank's International Development Association

WHY is it so hard to make the case in the United States for helping Africa? One reason is that US lawmakers, while only too happy to talk down foreign aid, refuse to support aid programs that are both imaginative and consistent with their own objectives - one of which is to define a new, more appropriate role for government.

This is certainly one conclusion to be drawn from Congress's decision to cut US funding for the World Bank's soft-loan arm, the International Development Association. IDA was set up in 1960 to provide loans on easy terms to poor countries. This year it will lend more than $5 billion. Roughly half will go to sub-Saharan Africa.

About these ads

Two years ago, Congress agreed to a US contribution to IDA of $3.75 billion over three years, including $1.25 billion in 1996. Congress has now unilaterally reduced that to $700 million, and is giving mixed signals about cooperating when IDA comes up for its three-year replenishment next year. Other donors have warned that they will not make up the difference for yet another congressional U-turn. Clearly IDA faces some lean years.

Encouraged by their politicians to treat foreign aid with contempt, many Americans will ask why it matters. They may also ask why foreign aid should be exempted when the poor and elderly in America are taking their hit in the interest of reducing the US budget deficit.

The short answer is that while Congress is free to decide its priorities, this is not the way to do it. In reneging on its commitment to IDA, Congress is weakening an agency that is increasingly in tune with Africa's needs and with Congress's own goals. IDA is helping to redefine the role of government in Africa. In the process it is also helping to redefine foreign aid and move its parent, the World Bank, down the road to reform. Both have long been avowed goals of US lawmakers.

It was not always so. During the recession of the 1980s, the bank used IDA to impose deflationary policies on Africa, in an effort to restructure and open up economies. This cut social spending and pushed up food bills, adding to the misery of Africa's poor. But today, IDA's support for economic liberalization no longer jars. No African leader wants a return to subsidies and distorted exchange rates, and many are openly seeking to tap the formidable enterprise that exists in African villages. Just last week, Uganda's president Yoweri Museveni described privatization as the engine of growth in Uganda.

But in addition to promoting private flows, IDA is also the largest multilateral funder of social programs in Africa. In case this sets the alarm bells ringing, Republican members of Congress should be reassured: Hard-nosed economists from the World Bank have demonstrated that educating girls, providing credit for women, and funding preventive health care are among the best long-term investments a government can make.

This is as true of the US as it is of Africa, and it is only one of many intriguing parallels. "Reinventing government" is a central challenge for Africa as well as the US.

One reason so many World Bank programs in Africa failed in the 1980s is that they were implemented by corrupt and illegitimate governments. This is hard for the bank to deal with, because its mandate is economic, not political. But it is now using IDA to fund programs in which human rights, good governance, and economic development find common ground.

About these ads

In one example, IDA credit is helping to overhaul corrupt legal systems. This will reassure investors and make business transactions faster and fairer, but it will also speed up trials and save lives. There were no reported deaths from torture in Uganda in 1993, but more than 500 people died in jail. Many prisoners had not even been charged, let alone tried. IDA credit also helped the Ugandan government to demobilize 32,000 soldiers - one-third of Uganda's Army. Not only will this shrink the public sector; it should also improve security in the countryside and lessen the chance of abuse by unruly soldiers.

There are important lessons here. One warns against hasty decentralization for political reasons. Uganda has embarked on an ambitious plan to shift resources from the central to district governments because President Museveni wants to build up an alternative to tribalism, which he blames for the country's troubled past. But the evidence suggests that he may be moving too fast. Many districts can't handle the sudden influx of money. As a result, corruption is also decentralized.

Africa also suggests that reforming the public sector may, in the short term, cost more. Clearly, public-sector wages must be raised if civil servants are to avoid the temptation of corruption. Making the public sector more accountable may require the creation of new watchdog bodies, like the human rights and media commissions that were set up under Ghana's 1992 Constitution. Uganda's 32,000 demobilized veterans needed a sizeable grant to get them back on their feet; those who remained in the Army got a hefty pay raise as an incentive to professionalism.

It is not yet clear whether the World Bank has absorbed the lessons from this African experiment. One, certainly, is that imposing conditions will backfire if a government is not a willing partner. Senegal balked at conditionality throughout the 1980s. Uganda, in contrast, has embraced public-sector reform because it can see the benefits, not because of World Bank pressure. The government was only too happy to reform a system that was so mismanaged that it was paying 30,000 nonexistent civil servants - so-called "ghost workers."

Such programs are a thoughtful, imaginative attempt to respond to Africa's contemporary needs. They also help redefine foreign aid away from handouts and more toward a partnership in which donors and recipients learn from each other and address common problems. This should be music to the ears of members of Congress, who complain incessantly about the "welfarism" of aid. If, after badgering the World Bank to reform for so long, they cannot seize the opportunity, it is their loss. The bank and its African partners should take credit for a job well done and persevere.

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