Friday, 1 June 2007

World Bank's Vulture Aid May Affect Poor Countries

By Syed Akbar
Hyderabad, June 1: The World Bank's decision to float "vulture aid" to assist heavily indebted poor countries that have become victims of private moneylenders will open the Pandora's box rather than restructuring their shattered economy.
According to city economists, the World Bank's decision is wrought with more dangers and will further harm the economy of the poor countries, particularly in Africa and Latin America. The WB's "vulture aid" is motivated and will benefit the bank more than the countries affected.
They, however, feel that it will not have any affect on a big country like India, which has vast foreign reserves and a strong currency. The real aim behind the "vulture aid" is ensure recovery of World Bank loans.
The World Bank came up with the idea of "vulture aid" to counter "vulture fund", a term referred to the blackmailing tactics of private moneylenders who help the poor countries with funds only to recover them at a later stage with heavy interest and other costs. As many as 40 countries have fallen prey to the so-called "vulture fund", the latest victim being Zambia. Even Argentina is no exception.
"The World Bank itself is a big vulture. It has been feeding on the economy of poor and heavily indebted nations for quite long. The Bank has become quite unpopular. By floating the so-called vulture aid, the Bank wants to earn a good image on one hand, and ensure that the loanee country is in a position to pay back its debts on the other. The Bank is doing to service to the poor nations," argues K Venugopal, director of Centre for Documentation, Research and Communications.
The World Bank on Friday announced that it will reduce the commercial debts of poor countries, which are preyed on by "vulture funds". The Bank said it would now extend the life of its debt reduction facility, which helps countries buy back their commercial debts.
While vulture funds are "outrageous, immoral and perverse", the vulture aid now being offered by the World Bank is equally bad. "The bank's vulture aid my temporarily help the poor nation over come the crisis. But this is in a way beneficial to the World Bank. The poor country will not press for a waiver of the World Bank load. The vulture aid is nothing but burdening the already burdened poor nations," points out Prof. D Narasimha Reddy, visiting professor of the Institute of Human Development, New Delhi.
Prof K Haragopal of the department of political sciences, University of Hyderabad, is of the view that whether vulture fund or vulture aid was a perpetration of injustice and a threat to democracy in poor countries. "It is nothing but killing a poor nation economically by extorting money," he said.
However, Danny Leipziger, the World Bank's vice-president for poverty reduction and economic management, said that extending the life of its grant-based debt reduction facility would help curb the increasing litigation against poor countries by vulture funds.
"The spate of litigation by vulture funds against countries receiving debt relief will penalise some of the world's poorest countries unless we tackle this aspect of commercial debt more actively," he said.
The World Bank has estimated that more than one-third of the countries which have qualified for its debt relief have been targeted with lawsuits by at least 38 litigating creditors, with judgements totalling $1bn awarded in 26 of these cases.
As recently as February Zambia agreed to pay $15.5 million to a British Virgin Isles-registered firm to settle a case at London's High Court. The company, Donegal International, had taken Zambia to court seeking payment of a debt and late payment penalties.

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