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Profile: World Bank
World Bank was a participant or observer in the following events:
Ghanaian President Kwame Nkrumah rejects IMF and World Bank recommendations to implement a economic development strategy based on non-inflationary borrowing and reduced government spending. Ghana’s refusal to implement these reforms makes it ineligible to receive loans from the two institutions. Nkrumah continues with a policy aimed at diversifying the Ghanaian economy through import substituting industrialization (ISI). [BBC, 11/4/1997; West Africa Review, 1999; Encyclopaedia Britannica, 2004]
The IMF and World Bank begin working with the military junta in Ghana, providing the country with standby credit. Western countries agree to postpone Ghana’s debt obligations until December when an IMF-sponsored meeting is scheduled to convene (see December 1966). [West Africa Review, 1999]
The military government of Ghana meets with the Paris Club of Western governments and forges a debt rescheduling agreement, which defers Ghana’s debt obligations between June 1966 and December 1968 to the period 1971-1979. [West Africa Review, 1999]
By 1979, Pakistan’s economy is on the brink of collapse. Pakistan owes large debts to international organizations such as the World Bank and the International Monetary Fund (IMF), but lacks the money to pay off its loans. The criminal BCCI bank led by Agha Hasan Abedi comes up with a scheme to save Pakistan’s economy. In 1979, the IMF says that if Pakistan increases its hard currency reserves by at least $50 million for 90 days, Pakistan’s State Bank can raise the lending limits for commercial banks. With banks able to make more loans, the economy will be able to perform better. BCCI secretly loans the State Bank the hard currency until the 90 days are over and then takes it back. Having established this system, BCCI helps Pakistan’s State Bank numerous times in subsequent years to avoid financial limitations placed on Pakistan. BCCI will finally collapse in 1991 (see July 5, 1991). [Beaty and Gwynne, 1993, pp. 292-293]
The population of Buenos Aires grows from 3 to 9.5 million. During this time, the city’s public water and sewage utility company, Obres Sanitarias, is hit with a number of budget cuts recommended by the IMF and World Bank, and cannot afford to implement the needed upgrades and improvements. By the late 1980s, it is apparent that the utility will need a huge infusion of capital to extend its services to the new inhabitants of the city. [Public Citizen, 6/14/2007] Less than two thirds of the city’s population is connected to the water system while less than half has access to the sewers. Moreover, up to 50 percent of the system’s water is lost because of leaks. As a result, the per capita consumption of water is an extremely high 600 liters per customer. [Inter Press Service, 4/13/1993; CBC News, 3/31/2004] The World Bank steps in and offers to lend Argentina hundreds of millions of dollars to upgrade the city’s water infrastructure—but only on the condition that it privatize Obres Sanitarias. [Public Citizen, 6/14/2007] Critics of the privatization plan will later argue that despite its lack of cash-on-hand, Obras Sanitarias was a “well-run company” with little debt and was capable of expanding on its own—had it been sufficiently funded. [Santoro, 2/6/2003]
The Mexican government, with technical assistance from the World Bank, sells off a profitable phone company called Telmex. In the months preceding the sell-off, the Mexican government increases the rate of calls by local users from 16 pesos per minute to 115 pesos per minute in order to make the company more attractive to potential buyers. This makes the privatization of the phone system detrimental to consumers. In a 1992 report, The World Bank will admit that “the privatization of Telmex, along with its attendant pricetax regulatory regime, has the result of ‘taxing’ consumers—a rather diffuse, unorganized group—and then distributing the gains among more well-defined groups, shareholders, employees, and the government.” [Global Exchange, 9/2001, pp. 4 ]
The World Bank approves and provides funds for a team of British private sector technical and financial consultants to advise the Argentine government on the privatization of its water and sewer sector. [CBC News, 3/31/2004]
The Dabhol power plant.
[Source: Enron]The Indian government approves construction of Enron’s Dabhol power plant, located near Mumbai (Bombay) on the west coast of India. Enron has invested $3 billion, the largest single foreign investment in India’s history. Enron owns 65 percent of the Dabhol liquefied natural gas power plant, intended to provide one-fifth of India’s energy needs by 1997. [Indian Express, 2/27/2000; Asia Times, 1/18/2001] It is the largest gas-fired power plant in the world. Earlier in the year, the World Bank concluded that the plant was “not economically viable” and refused to invest in it. [New York Times, 3/20/2001]
The World Bank purchases a five percent stake in Aguas Argentinas, a consortium of private water companies that took over Buenos Aires’ public water utility in 1993. As the civil society organization Public Citizen will later note, the bank’s investment makes it “a lender in, partner in, and public relations arm of their ‘model privatization project.’” The 1993 privatization of the city’s water utility had been made under pressure from the World Bank and IMF. [Public Citizen, 6/14/2007]
Haitian Prime Minister Smarck Michel begins a 10-day trip aimed at “unlocking about [$1 billion] in foreign aid stalled after a political row in Haiti about planned privatization.” He begins in New York where he meets with commercial bankers. Afterwards, in a two-hour press conference with the Haitian press, he explains to his Haitian viewers that the World Bank, International Monetary Fund (IMF) and the Inter-American Development Bank (IDB) are holding back $150 million until Haiti can “fulfill the conditions which structural adjustment demands,” and warns that there will be “dire consequences” if the Haitian people continue to resist privatization and other neoliberal reforms. [Haiti Progres, 9/13/1995]
During the World Bank’s annual meeting, the Bank and the International Monetary Fund (IMF) pressure Haiti to sign a letter of intent assuring the US, IMF, and other donors that Haiti would proceed with the Structural Adjustment Program that President Aristide had agreed to in August 1994 (see August 1994) before he was restored to power by a US-led multinational force. Haiti, whose parliament and population are strongly opposed to the neoliberal reforms, refuses to sign the letter. [Multinational Monitor, 11/2004]
Aguas Argentinas begins pushing hard for revisions to its 30-year contract to manage Buenos Aires’ water and sewer system. The World Bank, which has invested hundreds of millions of dollars in the project and has a five percent stake in it, sends Ventura Bengoechea, one of its senior water managers, to join Aguas Argentinas. The manager stays with Aguas Argentinas until a new contract is signed in 2000. During that period he remains on the World Bank’s payroll. [Public Citizen, 6/14/2007]
The head of ETOSS, the regulatory agency that oversees the management of Buenos Aires’ privatized water and sewer utility, tells Congress that Aguas Argentinas has only built a third of the new pumping stations and underground mains it promised to complete by 1997. Moreover, it has only spent 9.4 million of the promised 48.9 million in improving the sewage system. Citing the supposed need for “further investigation,” the company has put off construction of the Berazategui wastewater treatment plant. As a result, sewage is being dumped into rivers and cesspools, raising nitrate levels in the water (nitrates reduce the flow of oxygen to the brain in infants) and increasing the risk of various waterborne illnesses. According to the World Bank, by delaying the project, Aguas Argentinas is saving $100,000 dollars a day. [Inter Press Service, 4/13/1993]
The World Bank and the International Monetary Fund announce that they will send their economists to Iraq to assess needs for reconstruction as soon as it is safe to do so. The decision was made “with strong pressure from the United States,” the New York Times reports. [New York Times, 4/14/2004]
A team of economists and officials from the World Bank, IMF, and UN meet in Iraq to consider a new economic policy for the country. Nicholas Krafft, one of the economists with the World Bank, says that Iraq’s economy would be more accurately described as a “socialist command economy” than a “post-conflict economy.” He says “a macro-economic framework for Iraq including budget, fiscal, and monetary issues” needs to be established as part of the country’s transition to a market economy. “The issues of subsidies, prices, and state enterprises will have to be dealt with,” he adds. Kraft also says “it is important to involve Iraqis in this decision and the coalition is increasingly doing that.” [Agence France-Presse, 6/10/2003]
Muhammad Naeem Noor Khan interrogated. [Source: BBC's "The New Al-Qaeda."]Muhammad Naeem Noor Khan, a young Pakistani, is arrested in Lahore after six weeks of surveillance by Pakistani authorities in conjunction with US intelligence agencies. The US and Pakistanis learned of Noor Khan after arresting another al-Qaeda suspect, Musaad Aruchi, a month before (see June 12, 2004), and they had been tracking him since then. Noor Khan is taken to a high-security prison by Pakistani authorities, who resisted pressure from the CIA to let them completely handle the operation. [Guardian, 8/8/2004] American intelligence agents find what they later call a “treasure trove” of information in Noor Khan’s computers and documents. [CNN, 8/2/2004] Khan is a communications hub of sorts for al-Qaeda. He is in frequent contact with dozens of other al-Qaeda terrorists around the world and passing messages back and forth from more senior al-Qaeda operatives. Former National Security Council official Gideon Rose will later say, “It is obviously a very serious victory. It is obvious that there is a real find here.” [Guardian, 8/8/2004] Khan, who speaks fluent English, is not just a center for expediting clandestine communications between al-Qaeda leaders and their underlings, but also handles and collates documents, reports, maps, and other information, and sometimes performs his own intelligence-gathering, usually on trips to Britain. [MSNBC, 8/8/2004] Khan’s computer contains detailed surveillance information about five US buildings—the Stock Exchange and Citigroup’s headquarters in New York City, the Prudential building in Newark, and the International Monetary Fund and World Bank headquarters in Washington—all possible targets for future al-Qaeda attacks, though the information is all from 2000 and 2001. Other sites in New York City and San Francisco are mentioned, and meticulous information about London’s Heathrow Airport is also found. Pakistani intelligence officials believe that the information indicates a “present” threat, and so inform their US counterparts. Later in the month, the Pakistanis convince Khan to “turn,” or become a double agent. Khan will subsequently send e-mails to dozens of operatives all requesting that they contact him immediately (see July 24-25, 2004). [Guardian, 8/8/2004]
Entity Tags: World Bank, Prudential, New York Stock Exchange, Pakistan Directorate for Inter-Services Intelligence, International Monetary Fund, Muhammad Naeem Noor Khan, Central Intelligence Agency, Citigroup, Gideon Rose, Heathrow Airport, Al-Qaeda, Ahmed Khalfan Ghailani
Timeline Tags: Complete 911 Timeline
A State Department report on world drug production suggests that, as the Associated Press puts it, “Afghanistan has been unable to contain opium poppy production and is on the verge of becoming a narcotics state.” The area in Afghanistan devoted to poppy cultivation (the raw material for opium and heroin) in 2004 more than tripled the figure for 2003. The report suggests this situation “represents an enormous threat to world stability.” [Associated Press, 3/4/2005] Drug eradication efforts have been almost completely ineffectual. For instance, in May 2005 it will be reported that Afghanistan’s US-trained Central Poppy Eradication Force has destroyed less than 250 acres, well short of its original goal of 37,000 acres. [New York Times, 5/22/2005] The drug economy now accounts for between a third and half of the country’s economic output. The World Bank estimates that opium cultivation can generate at least 12 times as much income as alternative crops. [Slate, 5/18/2005]
The European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB), and the World Bank pledge to invest €24.5 billion in countries such as Latvia and Hungary that have been hit by the global economic slump. In a joint statement, the three groups announce that the two-year joint initiative will include equity and debt financing, and access to credit and risk insurance aimed at encouraging lending, on top of the countries’ national government responses. The bailout is designed to “deploy rapid, large-scale and coordinated financial assistance… to support lending to the real economy through private banking groups, in particular to small-and medium-sized enterprises.… The response takes into account the different macroeconomic circumstances in, and financial pressures on countries in Eastern Europe, acknowledging the diversity of challenges stemming from the global financial retrenchment,” the groups add. The EBRD was founded in 1991 to assist the transition of former communist nations to market economies—investing across 30 countries including Ukraine, Moldova, and Russia. “The institutions are working together to find practical, efficient and timely solutions to the crisis in eastern Europe,” says EBRD President Thomas Mirow. [BBC, 2/27/2009]
The World Bank predicts a 2.9 percent contraction in the global economy and adds that unemployment and poverty will continue to rise in developing nations in 2009. The revised previous estimate of a 1.7 percent decline causes a slide in US and European stocks and commodities. Three months ago, the World Bank issued a new estimate of 2 percent in 2010. Although the S&P 500 remains up 33 percent from its 12-year low in March, since June 12, the index has fallen 5.1 percent. Last week, the S&P 500 lost 2.6 percent, as a turndown in crude oil wounded fuel producers and Standard & Poor’s rating agency downgraded 18 banks’ credit ratings. Speaking in Paris today, economics professor Nouriel Roubini—who predicted the current financial crisis as early as 2006—says the global economy could suffer another slump due to higher oil prices and increasing budget deficits. “I see the worry of a double whammy” because of energy costs and fiscal burdens, thus increasing the risk of a setback in the economic recovery. He says that oil might rise to $100 a barrel. The increase in the value of the dollar blunted the appeal of commodities as an alternative investment, and sent copper, gasoline and oil prices lower. Amid the resignations of two more board members, bringing the total of departing directors to seven since April, Bank of America stock falls 6.1 percent to $12.41, the bank’s steepest intraday decline since May 15. It is expected that at the end of their two-day meeting on June 24, Federal Reserve officials might announce that the US is showing signs of surfacing from the worst recession in 50 years, although, after their last meeting in April, they announced that the economy would “remain weak for a time.” It is anticipated that central bankers will keep the benchmark interest rate in the range of zero to 0.25 percent. [Bloomberg, 6/22/2009]
The Group of 20 (G20)‘s pledge to return balance to the world economy may place the US dollar in a precarious position in the long run, experts feel. Over recent weeks, the dollar has fallen 4.3 percent this quarter because of equity market weakness as well as emerging major currencies as other countries begin their recovery from the worst economic downturn since the 1930s. Some G20 meeting attendees see the dollar as susceptible to damage while questioning its stability as well as its status as the global reserve currency, although the recent weakness of the dollar is not being blamed on the weakness of the US economy. Analysts say that short-term effects to the G20 meeting of other wealthy, developing economies will be subdued; however, they say that over a longer period, bank stocks and energy prices as well as the dollar may be harmed by G20 economic balancing actions. World leaders have expressed concern that the US economy’s recovery cannot be sustained because its rebound is due to government stimulus and increased borrowing. During the meeting in Pittsburgh, the leaders agree that to balance the global economy, the US needs to save more while the massive exporter China needs to consume more to support its growth. David Gilmore, partner at FX Analytics in Essex, Connecticut, explains, “The real problem is the world needs a huge consumer and the US has been basically doing it for decades, and now it’s spent.”
US Dollar as Reserve Currency - Robert Zoellick, president of the World Bank, says the US should not take the dollar’s status as the key global reserve currency for granted now that other options are emerging. Zoellick says that shifting global economic forces reveal that it is time to prepare for growth to come from multiple global sources. Although the world’s largest economies also agree to phase out subsidies on oil and other fossil fuels over the “medium term” to combat global warming, they acknowledge that the phase-out probably will not affect energy markets in the short term. In the long term, they say, the move could weigh on energy markets, cutting fuel demand in emerging markets. As for emergency economic support, G20 leaders promise to continue support until recovery is “at hand,” thus providing some relief for foreign currencies.
Economic Rebalancing Equals Shift from Dollar as Reserve Currency? - Global economic balancing is a two-edged sword for the dollar because the currency has been damaged by extremely low interest rates and the glut of dollars in the international monetary system. But the recession already has triggered partial rebalancing as US consumers cut spending while China spends $600 billion to stimulate its economy while making itself less dependent on exports. Analysts quickly note that minus tangible steps, the pledge only serves as lip service. The analysts also say it is improbable that countries would bend to G20 rules on how to run their economies. Nonetheless, the plan would be a clear shift, signaling a move away from the dollar. Currency strategist Kevin Chau of New York’s IDEAglobal says: “In the long run, I think they want another reserve currency, whether it’s the Special Drawing Rights or the Chinese yuan. For any country’s currency to gain that kind of credibility and trust, it would take years of development.” Still, last week, the dollar fell to a new low against the euro and even dropped below the key 90 yen-per-dollar level. [Reuters, 9/27/2009]
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