Study calls World Bank, IMF efforts self-defeating

August 31, 1992|By Los Angeles Times

WASHINGTON -- Economic policies advocated by the World Bank and the International Monetary Fund are contributing to a Third World environmental crisis that is undermining the very development strategies the international lenders seek to promote, according to a new study to be released today.

Unless the major lending institutions begin to factor environmental considerations into their planning, their economic development strategies for the Third World will in the long run prove to be self-defeating, a two-year study by the World Resources Institute warns. The institute is a Washington think tank that specializes in environmental and economic issues.

"Natural resources and environmental health are deteriorating at alarming rates in much of the developing world" -- a trend that IMF and World Bank policies have unintentionally accelerated, institute President James Gustave Speth said in releasing the report, which was written by economists Wilfrido Cruz and Robert Repetto.

Although the study, touted by Mr. Speth as the first major effort to examine the environmental impact of macroeconomic planning, focused on the Philippines, its conclusions are relevant to other developing economies, including those of Eastern Europe and the former Soviet Union, the authors say.

"Macroeconomic loans will continue to be important in the former Soviet Union . . . yet current IMF policy ignores the environmental impact" of such development strategies, says Mr. Repetto, the institute's vice president and senior economist.

In the Philippine case, Mr. Cruz and Mr. Repetto say that strategies devised to help that country overcome a debt crisis in the 1980s actually undermined its long-term recovery prospects by encouraging the exploitation of natural resources and environmental pollution.

The IMF stabilization program for the Philippines concentrated on developing the country's industrial sector to reduce its growing foreign debt, "ignoring the decrease in natural assets" as exports were increased, Mr. Repetto says.

The emphasis on industrial development in the 1960s saw waves of workers migrate from the countryside into Manila. But in the subsequent debt crisis of the 1980s, the tough economic medicine prescribed by the IMF, along with a decrease in exports caused by slumping world demand, forced many of those workers to re-migrate to forested areas and marginal lands in search of a living. The result was an increase in deforestation, over-fishing and soil erosion, the report says.

If the effects of IMF and World Bank policies are to "reduce the resource base from which exports are derived, then the policies become self-defeating," Mr. Repetto says.

"The deterioration of a nation's natural resource endowment is at least as serious an obstacle to sustainable development as the deterioration of its international credit standing," the authors say.

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