Where are the loans given to poor African countries going?
Poor countries which are rich in natural resources but fail to account for how they use loan revenues, should not be provided with World Bank, IMF loans, says Daniel Kaufmann. (Image: Development Institute)
Poor countries which are rich in natural resources but fail to account for how they use loan revenues, should not be provided with loans by the World Bank and the International Monetary Fund (IMF), declared the President of the Revenue Watch Institute.
Revenue Watch Institute’s Governance Index – which measures countries in the oil, gas and mining sectors for their quality of governance, accountability and safeguards against corruption – found that 80 per cent of resource-rich nations failed to achieve good governance in their extractives sector.
Addressing a World Bank seminar earlier this week, Daniel Kaufmann, President, Revenue Watch Institute, observed that a majority of these countries have failed to reveal how their loan revenues are being spent.
Out of the 58 countries examined in the index – which produce 85 percent of the world’s petroleum, 90 percent of diamonds and 80 percent of copper – only 11 countries were deemed “satisfactory.”
Shockingly, none of the 11 compliant countries hailed from Africa, with the best three performing countries on the index being Norway, US and UK.
The best performing African country on the index, with a composite score of 63 out of 100, was Ghana.
Most African countries such as Tanzania, Botswana, Egypt, Nigeria, Angola and Libya, among others, failed even to score half-way on the index.
Take the case of the West African economy of Nigeria which notched up a meagre score of 42 out of 100. Between January 2012 and July 2013, its sale of crude oil amounts to $50 billion – and this amount is higher than the total annual foreign development aid to the region.
Another shameful example is that of the Central African economy of Angola tied with Nigeria at 42%. The IMF has estimated that $32 billion in oil revenues, equivalent to one quarter of its GDP, were omitted between 2007 and 2010.
Kaufmann said that 20 per cent of the world’s countries that are economically poor but rich in natural resources, mostly hailing from Sub-Saharan Africa, live on less than $2 per day.
In case there is no improvement in corruption and governance, the level of poverty in resource rich countries, which have abundant reserves of oil and gas, is expected to escalate to 50 per cent of the world’s poor.
A former World Bank Institute official who how heads the Revenue Watch Institute – a research group promoting accountability of natural resource revenues to help countries realise development benefits – Kaufman noted that corruption should be addressed as a developmental priority.
Transparency and governance of natural resource wealth can be increased at a global level. 41 countries are participating in the government, corporate and civil society coalition that sets global standards for openness in the managing revenues from natural resources – Extractive Industries Transparency Initiative – and transparency is encouraged by the G20 group of the world’s leading economies.
For the time being, the United States and the European Union have passed legislation requiring publicly traded companies to disclose their payments to governments for resource extraction.