World Bank, PBS, and Aid Politics for Dummies: Part 1

I haven’t been this excited about economics (and it might just be hormones) since I was a kiddie intern at a law firm and discovered that each copy I made for the partner ka-ching-ed the firm something like $1.50. I used to go home and record my august contribution to the corporate machine.

There is a fascinating conversation going on between Ethiopians in the Diaspora and the World Bank, and even for us econ-dropouts, it has been an epiphany. Let the choir say ‘Amen.’

I know. I know. Is there a subject any less interesting than economics? I hear ya. But trust me on this… something’s different.

So last December, after the Ethiopian government decided the best way to handle peaceful protest was to… negotiate in good faith to find a solution to the problem…. Ehhh… damn hormones. No. After the Ethiopian government thought it was best to shoot people and establish newly-minted concentration camps, the World Bank and donor nations took a principled stand and suspended direct budgetary aid. Who’hatt?! Did they ever.

But spring has sprung and donor nations and the World Bank got that itchy feeling. Talk about resuming aid to the Ethiopian government started. (By the way, donors who provide budget support to Ethiopia include the African Development Bank, Canada, the European Commission, Germany, Ireland, Sweden, the UK, and the World Bank.)

Tiny problem: with the Ethiopian government continuing to act like a goon (say, like, conducting the most deliriously bizarre trial against opposition leadership, journalists and members of civic movements this side of an Australian zoo), no decent human being would dream of rewarding it with a blank check.

Big Solution: Resume direct budgetary aid but don’t call it direct budgetary aid. This is your brain; this is your brain on World Bank.

Here is the flyer that started it all for me. It urges American taxpayers to hold the World Bank accountable, and not repeat past disastrous forays into lending money to authoritarian governments. There was an action item to call the lead economist, the country director and the country programme coordinator of the WB.

That was followed by a brilliant article in Ethiomedia, Is aid in Ethiopia a tool for, or a hindrance to, poverty reduction, written, I do believe, by our own Inde Hewan. Just brilliant.

The article points out a few examples of aberrant spending habits of budgetary assistance by the Ethiopian government (besides what it spends on “security and order”), including:

For example, the government has used funds earmarked for education for a two-week long highly politicised mandatory training of tens of thousands of high school and elementary school teachers on matters of “peace and security”. This training was intended to make the teachers cooperative in denouncing high school and elementary school children who have been protesting in many towns in Ethiopia against the imprisonment of opposition leaders and human rights activists.

So the country director of the World Bank, a Dr. Ishac Diwan, introduced a new way to resume aid in the form of a loan titled “Protection of Basic Services” (PBS). Terrible name for us dieheart aesthetes. Even more terrible news for those brave souls actually concerned with, what’s it called, substance.

PBS endeavors to funnel money not through the federal government of Ethiopia (which up until now has been standard practice), but through districts (local governments). This was distressing because the PBS was sans “the safeguards that accompany standard Bank investment projects.” Okay. Fine. Do it through districts. Tiny problem: the EPRDF has made sure a majority of the districts are controlled by the same party—the EPRDF. You see how that works? What is the difference between giving money directly to the government as opposed to the districts? Nothing. So…uhhh? Why go through the whole charade? Because. Three donor nations signed up for this, as Dave Chappelle would put it, malarkey: Canada, Ireland, and the UK.

Then, because the World Bank is badass like that, the district level focus changed to regional support- sort of like states. And who controls the states? Three guesses--- and one of them is not Tom Delay.

So the article basically lays out the discrepancy between the donor nations’ lip service about good governance (Tony Blair call your office) and their actions. Ethiopia’s rural poor cannot be aided if block grants are made through regional operatives, and in fact, the way this budgetary support is structured, it can have the opposite effect... so sayeth Inde Hewan.

Here’s a sentence I found intriguing, that later ‘splains a lot.

We are also keenly aware that, while there are many dedicated and competent staff in the Bank, incentive structures for promotion and recognition do not reinforce, but rather work against, motivations of staff to work toward reducing poverty.

Huh?! Read on.

Backing up a little, on March 10, 2006, Dr. Diwan had written a letter to Ethiomedia in response to the uproar about the introduction of PBS. I know I am an economics neophyte, but here is something I found a tad disquieting.

In justifying PBS and to refute calls to postpone its launching Dr. Diwan states:

An issue raised was that of whether the proposed Bank strategy and Protection of Basic Services Project might be postponed. With any significant delay, teachers' and nurses' salaries may go into arrears; children may go to school but may not learn anything in classes with too few teachers; malaria bednets will not be procured in sufficient quantities and the numbers of children exposed to malaria will remain very high; immunization of young children against the most basic of diseases will be severely curtailed; thousands of women who demand contraceptives will not be able to access them. It is difficult for us to justify delaying funding when these are predictably the results.

Question: what exactly does the Ethiopian government DO for a living if it can’t even provide these very basic needs for its citizens? You mean without donor assistance the EPRDF can’t pay salaries for teachers and nurses? And yet, the government machinery tells us that Ethiopia will enter middle-income nations soon what with all the economic growth coming out of its tushy.

In fact, according to Dr. Diwan,

the Bank has identified critical areas of need that require additional financing in order to be able to improve the lives of the poor. These areas include primary and secondary education, primary healthcare (especially for malaria, immunizations, and maternal health), safe water supply and sanitation, social welfare, and agricultural extension services that are provided by regional and local woreda level administrations.

(AllEmphasis mine.)

Hmm. So donor nations will take care of educating Ethiopians, providing them with clean water, immunization, social welfare… So what has the Ethiopian government been doing all these years? I mean, I know ethnic baiting and running around in Humvees is a lot of work, but really?

Part 2 is coming up. In the meantime, here are some excellent articles:

Addis Ferenjie has a superb interview with an economics Ph.D. (thankfully they still make them) who patiently explains to us the basics of economics and what this PBS means. For those of us whose eyes glaze whenever the subject of economics comes up, it is overwhelmingly useful and very economics- fara friendly.

Dr. Diwan responds to Inde Hewan’s letter.

And then, bara bing! A response to the response.

The Network of Ethiopian Scholars (fast becoming one of my favorite think tanks-- although why they don’t have their own website is beyond me) also respond to Dr. Diwan.

Let me be the first to thank Inde Hewan for her incredible work in bringing light to this story. I, for one, was frustrated by the working of aid, and could not understand why after billions of dollars in aid, Ethiopia and Africa have not made a dent in alleviating poverty.

Most of us in the Ethiopian Diaspora, very much including me, have been absent from this dialogue, and it is especially inexcusable since there are so many educated Ethiopians among us. Whatever our failures in the past, it appears we are finally saying “never again” to disengagement and apathy. I am in awe of people like Inde Hewan who have taken it upon themselves to stay involved, even when there is no overarching support system to help them. So, sister girl, salute.

It’s important to remember we can’t keep leaving Ethiopia’s welfare to others. We have to show up. As much as I harangue Carter, Blair, Clinton, the World Bank etc, I have come away with the fundamental understanding that each one of us has a choice: we either do our part, or bear witness to another cycle of poverty and misery geared to shut up yet another generation of Ethiopians. We should wish better for our children.

Dr. Diwan has very graciously invited World Bank employees of Ethiopian decent to a meeting to discuss this matter further. Maybe someone can update us.

The African Renaissance can’t be jump started by anyone except Africans.

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On a different subject, Black Looks covered the story on the Ethiopian government’s magnificent show of ‘good governance’ by blocking blospot.com. Check out this brilliant comment from an “aeth”:

It is easy to assume that the Ethiopian government is blocking certain blogs because it wants to silence political opposition, however the fact that only a selected opposition blogs calls for a more detailed analysis. The Ethiopian blogosphere is dominated by extremist elements in Ethiopia; especially the majority of the blog writers were members of the military junta that ruled Ethiopia before 1991. Most escaped to the west as the criminal government collapsed. Today they call themselves Democrats, however if one is to read their blogs it is filled with hateful speech designed to ignite Ethiopia in to a genocidal nightmare.

Hm. So much for ‘detailed analysis.’ Is intractable mediocrity a prerequisite for everyone at the EPRDF?