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Financial Institutions

I congratulate my noble friend on raising the issue of IFIs, which have had too little attention in Parliament. I have tried to understand the present crisis through the prism of the needs of developing countries which inevitably are going to be the worst casualties. In Beijing the UN Secretary-General warned that the crisis could be the last straw for the world’s poorest: "““It threatens to undermine all our achievements and all our progress””." The president of the African Development Bank, Dr Donald Kaberuka, recently expressed similar concerns and said last week that on present trends, Africa can no longer reach the millennium development goals. Some 17 million people face starvation in the Horn of Africa alone, only partly because of conflict. The situation is being aggravated by the wider economic climate. The IMF itself has warned that rising prices and inflation are already undermining the improvements made in economic and social stability in the third world over the past two decades. Inflation in sub-Saharan Africa is expected to reach 12 per cent by next year. The president of the World Bank has made food prices a particular concern, and our Government have responded positively. I will not repeat the stories of poverty and hunger that have been reported in the press over the past few weeks, but leaders of developing countries are naturally pessimistic not just about the state of the world economy, but the ability of the Bretton Woods institutions to cope with it any longer. There is a vigorous network of NGOs with a good deal of expertise nowadays in the workings of the IFIs, and they are arguing for a stronger voice for these countries at World Bank and IMF meetings. Even the Group of 20 meeting in Washington next month will have only South Africa to represent the entire continent of Africa. That is why 556 NGOs, 60 of them in Africa, have called for a Bretton Woods II, a global summit genuinely representing all UN members. Decisions will still have to come from the G8 plus two or three, and parity between borrowers and non-borrowers would be difficult to achieve, but in today’s crisis with more developing countries becoming lenders, surely more account should be taken of them. Does the Minister agree that Africa should have a third seat at the World Bank, and will the UK support the case for wider third world representation? More of the countries invited to Beijing should be included in IMF meetings. Incidentally, it was another Beijing summit two years ago which brought an African forum together and created a new momentum of Chinese aid and investment in Africa, which has caused considerable confusion in the western aid world. It becomes even more significant at a time when China has been asked to become one of the world’s bankers. In contrast to its image, Africa has enjoyed spectacular economic growth of about 7 per cent over the past decade, and progress has been made in health and education, but that has occurred in spite of the restraints imposed by the IFIs, as outlined by the noble Lord, Lord Desai. No one should be in doubt about the low reputation of the IMF and the World Bank in Africa. That was dramatically portrayed in Abderrahmane Sissako’s 2006 film ““Bamako””, when leaders of the two institutions were literally standing trial while Africans suffered from globalisation and harsh conditionality. What right, for example, did the IMF have to interfere in the details of wages of teachers in Malawi and Mozambique? The consequence, as recent research by ActionAid shows, is that untrained teachers are now being employed, lowering the quality of education. The IMF has not understood the principle of the poverty reduction strategy. I know that my noble friend will join me in arguing that the IFIs should be much more accountable, and perhaps the Minister agrees with that. Can he forecast our position at the forthcoming finance meeting in Doha? That may be the first international meeting that represents the needs of the poorer world effectively. The Doha round must also be revived at all costs to rebalance world trade and recognise the legitimate demands of the LDCs. We have to look at the long term. The world must find a solution in which, as many economists since Keynes have argued and even more do today, fairer trade and steady social improvements in the poorest countries will in the end create a climate of economic stability for all of us.