By Deki Alula

In an attempt to divert attention from the serious problems facing his administration, Mr. Meles Zenawi wrote a hollow piece of paper sometime ago called “a renewal something” and ordered his employees and party cadres to discuss it for months. Although I have serious doubts about the effectiveness of both the paper and discussions, Ethiopians finally got a temporary relief from the nauseating media coverage of the drama, until now. The new drama these days is entitled “Poverty Reduction Strategy”, which this time is written, choreographed, and directed by the world bank and played by the same actors headed by Mr.. Zenawi.

The world bank’s motive for being behind the latest drama is to increase its lending program to Ethiopia. That institution is fast running out of new “initiatives” to justify more lending since loans made to-date have not shown any improvement in the performance of the economy and/or in improving the livelihood of ordinary Ethiopians. For the unsuspecting, recycling of past loans under a new cover of poverty reduction strategy sounds a new initiative to support increased lending. Mr. Zenawi also considers this as a good diversion from the catastrophe awaiting the forthcoming decision on border demarcation with Eritrea, and also as an endorsement of his “renewal” propaganda. The beneficiaries from this process will be the world bank and Mr. Zenawi, and the losers will be the people of Ethiopia.

Those of us who are deeply disturbed about the unfolding events in Ethiopian politics should also be concerned about the disastrous direction of the government’s economic policies, including the heavy dependence on external borrowing. Loans contracted by Zenawi’s administration over the last ten years exceed all non-military loans contracted by the previous two regimes combined. As a result, Ethiopia’s external debt is equivalent to an entire year’s Gross Domestic Product, or about US$100 per Ethiopian young and old, or equivalent to nearly 20 years of all exports. Future generations are doomed to languish in perpetual poverty as they will use the little export earnings to service such hugh loans rather than to invest for economic development and poverty reduction.

Contrary to common perception, the primary interest of external financial institutions (such as the world bank) is to lend more for their own survival and to promote exports from the industrialized countries rather than to help promote the economic development in third world countries. As demonstrated amply by numerous studies, over fifty years of lending by the world bank throughout the world had been ineffective in promoting sustainable development and in alleviating poverty. In fact the reverse was true, where more lending had driven the poor countries into deeper poverty due to the escalating debt service. An excellent recent example in Africa is Ghana, where over 20 years of heavy lending had done very little to alleviate poverty or to promote sustainable development.

Instead, that country’s future cocoa and mineral exports will be used for servicing loans that did not generate much net economic benefits. While the world bank used Ghana as an “excellent” example to sell its structural adjustment programs to the rest of Africa 15 years ago, it does not mention that country as an example of success story these days because the numerous structural adjustment and project loans over the past twenty years did not have much impact either in alleviating poverty or in promoting sustainable development. This was the main point of President G. Bush’s speech during the United Nations sponsored economic development summit in Mexico two weeks ago, when he emphatically stated that the hugh loans made in the past to the world’s poor had failed miserably in promoting economic development.

You can draw your own conclusions about the effectiveness(or lack of) of world bank lending to Ethiopia by reading on the world wide web the institution’s lending over the past ten years and its proposed lending in the near future. First log on www.world bank.org, and click countries & regions on the left side. Then choose Africa-Sub-Sahara, and select Ethiopia from the list of countries. On the left side of the page, you will see Lending Projects and Lending Pipeline. You can then read summaries of the listed projects (you need acrobat reader to read the summaries, and for that you just download the acrobat reader for free). Pay special attention to the report on a proposed “Food Security Program
Project”, which is one aspect of the poverty reduction strategy. The paper explains how past loans for similar projects elsewhere in Africa have failed, but yet proceeded to recommend similar program for Ethiopia, which I am certain would lead to the same disastrous results.

The hodgepodge components included in that project, in addition to being incoherent, would not make the targeted beneficiaries any more food secure than they are now. More seriously, the project would lead to misallocation of resources, lead the country to adopt unsound economic policy, and promote corruption all the way to the smallest administration units. This is another vivid confirmation of how foreign lending institutions are perpetuating poverty rather than promoting sustainable economic development and poverty alleviation. President Bush was absolutely correct in his remarks at the Mexico summit.

In summary, the big talk that is now going on in Ethiopia about poverty reduction strategy has everything to do with lending more by the world bank (and other external lenders) and very little to do about reducing poverty in Ethiopia. It also has everything to do with Mr.Zenawi’s attempt to get external credibility for his miserably failing administration, and with his scheme to divert domestic attention from the soon to be exposed end results of his conspiracy with Shabia to destroy Ethiopia.