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For Immediate Release
Villagers Celebrate The Historic US Supreme Court’s Verdict Which Ended The Immunity of the IFIs
Ulka Mahajan on the Context of the Role of IFIs in the Development Agenda
Jesu Rathnam, Convenor, Coastal Action Network, on the coastal infrastructure and fishers struggle in India
By Tani Alex
For those closely looking at the trajectories of IFIs, especially the current trends of the New Development Bank (NDB) or the BRICS Bank, well, it’s all pancakes and fritters with news of NDB and BRICS Xiamen Summit all around.
The Bank, with 11 projects of over $1.5 billion already in their sack within a span of two years of their establishment, is targeting to lend $2.5-3 billion this year for ‘sustainable infrastructure’ ventures. In the last few weeks, BRICS witnessed saw a host of activities: NDB’s first regional centre opened in Johannesburg, South Africa; the interim sense of political ease happened between India and China on the Dokhlam issue just a few days before the Summit; the bloc again reinforced south-south cooperation by declaring to focus on the projects in Africa and Latin-America; their first project-financed firm commenced operations at Shanghai Lingang Distributed Solar Power Project (100 MW).
Now that the BRICS teammates have officially drawn the curtains at the finale this week at Xiamen, in their perpetual quest to overturn the western economic order, what were their projected takeaways placed side by side with their subtle agendas?
For our ease, let’s start with the first letter in the acronym coined by Jim O’ Neill of Goldman Sachs. Brazil, slouched under the pressure of staggering recovery from recession and joblessness, urged for economic cooperation in global markets.
Russia wanted to sign an intergovernmental agreement for international information security and did not hesitate to mention its initiative to establish an energy research platform for joint energy investment. They were also candidly advocating against global trade protectionism and for an open multilateral trade system.
Back here, India insisted on a medley of items—stronger cooperation in the financial sector and investment in private entrepreneurship to cater to the financial needs of ‘sovereign and corporate’ entities. Tenacious partnership with International Solar Alliance, birthed by both India and France, was also emphasised upon for ‘mutual gains’ through a comprehensive solar energy utilisation (read further exploitation of land resources for solar parks). Further India displayed vanity in having discovered digital economy as the tool for spurring economic growth and to attack corruption through demonetisation. While the World Bank and International Monetary Fund lauded this move, the citizens, independent experts, and local and international media criticised the reckless experiment thrust down to the country. In fact, RBI’s Financial Year report also indicated towards the monumental failure of the senseless decision. Media reports clamour on the resolution of the member nations to together fight corruption with a dedicated Anti-Corruption Working Group. Well, wait, did we hear anti-corruption? Does this also apply to the leaders of these nations as well, or to the higher management of their extolled NDB? We are reminded of Oscar Wilde, who said that the only thing to do with good advice is to pass it on. It is never of any use to oneself.
With the newly-begun construction of NDB headquarters in Shanghai last week and the sprouting AIIB with 80 members in its kitty, China, which who chaired this year’s Summit, did not miss time in laying bare its agenda – promoting its star project Belt Road Initiative (BRI), which linked its vital China-Pakistan Economic Corridor as well. During the Summit, China did not address its differences with India, which boycotted the BRI meeting earlier in May.
Further, China reiterated the idea of ‘BRICS Plus’ to invite more emerging developing economies to expand BRICS. Towards this end, China also invited leaders of Egypt, Guinea, Mexico, Tajikistan, and Thailand for dialogues on south-south cooperation and global development. It looks like China is on a high to alter the prevailing financial order and form a new open economic order, while critics point towards China’s discriminatory policies and trade barriers to favour local economy.
South Africa, the chair for next year’s Summit, elated by the opening of NDB’s regional centre, shared a concerted approach against global terrorism, while also listing out its goal of achieving the Sustainable Development Goals and Agenda 2063 Africa Union. Interestingly NDB’s only project in South Africa, a $180 million renewable energy project with Eskom, was rejected by the Government. When asked about the rejection, NDB’s Vice-President Leslie Maardop explained that the economic slowdown in the country melted the demand for electricity bringing it to a dip and that South Africa did not need new power supplies.
Let’s also quickly glance at other developments of this week, encapsulated here. The idea of BRICS credit ranking agency, which was pushed by India in Goa last year, was discussed again. Further, resilience and the ability of central banks of member nations to foster cooperation between Contingency Reserve Arrangement (CRA) and IMF was stressed by India. It is interesting to note here that earlier we were made to believe that CRA is an arrangement competitive to IMF and that it did not require dollar denominated IMF backing?
Another curious development during this Summit was the discussion to develop BRICS’ crypto currency, in line with its earlier agreement on lending in local currencies and settlement mechanisms. One wonders, why did the countries, especially China and India, ignore the foresightedness of their central banks, which recently cautioned against virtual currencies?
In retrospect, every year there are tall claims and forged partnerships under the façade of bilateral and multilateral talks among the BRICS members. However, it seems that no member country has given any deliberate and honest assurances pertaining to the human development—not in the parameters of amassing wealth, expanding economic markets or filling the ‘gap’ in infrastructure development alone, but that kind of an integrated growth which carefully avoids human exploitation, political manipulation, natural and human resource extraction, and devastation of natural environments.
~ Maju Varghese
Every year, India pays an enormous amount of money as commitment charges to the multilateral institutions for not utilising the loans sanctioned by them. Investopedia defines commitment charges as the fee charged by the lender to a borrower for an unused or un-disbursed loan since it has set aside the funds for the borrower and cannot yet charge interest.
According to the CAG, between 2009-2015 India paid commitment charges up to 602 crores to the external lenders. In 2014-15 itself, India was holding Rs. 2,10,099 crores of unutilised funds thus inviting a commitment charge of Rs. 110 crores. Finance Ministry had found that between 1991 and 2009, the government had paid approximately Rs 1,400 crores as the commitment charges for loans not utilised.
The commitment charges are coupled with interest while reporting by the ministry of finance which makes it difficult to understand the charges paid to different agencies in a fiscal year. The CAG observed that putting commitment charges under the head “interest obligation” is misleading as it does not reflect the nature of expenses.
Arun Jaitley, the Indian Finance Minister minister of India, has been raising the issue of commitment charges. In the 94th development committee of the World Bank, he raised the issue of commitment charges which is highest among multilateral development Banks and demanded its withdrawal. This was again repeated when the demand when the CEO of World Bank visited the country and met the Finance Minister. India is among the countries which are graduating from a low-income country to lower middle-income country resulting in loss of concessional finance from IDA loans.
World Bank charges a commitment charge of 0.25 per cent per annum on un-disbursed loans even if they are committed to be drawn in subsequent years. This is in addition to a front-end fee, a fee paid by the borrower to the lender before the loan offtakes, of 0.25 per cent on loan agreement amount (applicable on current loans). These commitment charges begin accruing 60 days after the loan agreement is signed. Despite resistance from the countries, the World Bank has stated that it will not be able to remove commitment charges due to its cost recovery guidelines.
According to the CAG, India had a total outstanding debt of 51,04,675 crores as on March 31, 2015. This increased to around 57,021,582 crores on August 15, 2016, which means a per capita debt of Rs 44,032. This comes to around 41 per cent of the GDP. To service this massive debt, India pays about 36,318 crores as interest payment every year. CAG further reports that in 2014-15, 77 per cent of the long-term internal borrowings and 73 per cent of the external borrowings were utilised for debt servicing, implying that a larger percentage of debt was being used for paying the existing debts. This, in turn, meant the lower percentage of debt was available for meeting developmental expenditure to promote growth.
Swatch Bharat and commitment charges
The World Bank had approved a US$1.5 billion loan for Swachh Bharat Mission-Gramin (SBM-G), Modi government’s much-hyped flag-ship campaign on Sanitation to support the government’s efforts to ensure all citizens in rural areas have access to improved sanitation. The loan sanctioned in 2015 is the Bank’s biggest lending in the social sector.
The mission has provision for incentivizing states on their performance in the Swachh Bharat Mission. The performance of the States will be gauged through an independent survey based measurement of certain performance indicators, called the Disbursement-Linked Indicators (DLIs). However, due to lack of independent verification of results, India missed the first disbursement of the loan. According to the media reports, India is likely to miss the second tranche too. Despite not receiving a single paisa, India has paid the commitment charge, interest, and front-end fees of USD 15.40 million so far.
The payment of commitment charges to the multilateral agencies because of governmental inability to plan and implement shows a lack of seriousness in using public money. CAG has mapped and pointed out the inefficiency of governments in utilising funds. The money that we pay as fine and commitment charges are a waste of public resources as pointed out by CAG in the reports from time to time. The proposal to set up a public debt and management agency for proper planning of external debt is still pending in spite of various statements by the finance minister.
Multiple CAG reports on debt need to be taken on a priority basis, and an oversight mechanism should be created within the parliament of India through a standing committee to look into external debt and also its investments abroad and making it transparent and accountable to the citizens of the country.
Netindia123.com: Medha Patkar demands more transparency in ADB projects
(May 9, 2017)
Webindia123.com: Medha Patkar demands more transparency in ADB projects
(May 9, 2017)
The Statesman: Call for nationwide protests against ADB’s projects in India
(May 8, 2017)
Business Standard: Medha Patkar demands more transparency in ADB projects
(May 8, 2017)
Eenadu: Medha Patkar demands more transparency in ADB projects
(May 8, 2017)
Sify.com: Medha Patkar demands more transparency in ADB projects
(May 8, 2017)
The CEO Magazine: Medha Patkar demands more transparency in ADB projects
(May 8, 2017)
Orrisadiary.com: ADB’s 50 years greeted with mass protest at Bhubaneswar, Odisha
(May 8, 2017)
Sambad: ଏସିଆ ବିକାଶ ବାଙ୍କ ବିରୋଧରେ ଆନ୍ଦୋଳନ (May 7, 2017)
The Shillong Times: ADB’s 50 years greeted with nationwide protests (May 6, 2017)
Navratnanews.com: 50 years of Asian Development Bank Destruction, Displacement and Exploitation of Natural resources (May 6, 2017)
Mumbainewsnetwork: ADB’s 50 years greeted with nationwide protests (May 5, 2017)
Daily O: ADB celebrates 50 years, but there’s a problem with development institutions (May 5, 2017)
The Ecologist: Asian Development Bank must end its 50 year addiction to coal!
(May 4, 2017)
The Telegraph: Protests against ADB projects (May 4, 2017)
Emaatimes.com: पटना: टुकड़ों में बंट कर रह गयी बिजली कंपनियां, गरीबों से दूर हो गयी बिजली
(May 3, 2017)
Janjosh.com: अगेंस्ट ADB की बैठक हुई सम्पन्न (May 3, 2017)
TwoCircles.net: Marking Asian Development Bank’s 50 years, protests to take place in over 100 places in India this week (May 2, 2017)
MattersIndia.com: ADB’s 50 years: Protests to take place in several places (May 2, 2017)
National News Analysis: Marking Adb’s 50 Years, Protest Actions To Take Place In Over 100 Places In India This Week (May 2, 2017)
Governance Now: ADB’s 50th anniversary, civil society’s 100 protests (May 2, 2017)
Counterview.org: Anti-ADB protests begin across India: Planks include loss of livelihood of indigenous people, eco-destruction (May 1, 2017)
Ecologise.in: ADB@50, Resistance@50 (April 28, 2017)
Counterview.org: 50 actions of resistance in India at 50 places against ADB’s 50 year of inequitable policies
(April 28, 2017)
(07 May 2017) Jhabua: Protest in Meghnagar, Jhabua against ADB and other IFIs
(May 6, 2017) Bilaspur: ADB Stop Violating Human Rights and Rights of Indigenous, tribal and forest communities: Stop Supporting Militarisation of our Territories
(May 5, 2017) Nagpur: Workers and Hawkers Stages Protests Against Privatisation of Civic Services
(May 5, 2017) New Delhi: ADB’s 50 years greeted with nationwide protests