TITLE: Development Banks Rush to Aid Quake Damaged Country

AUTHOR: Gumisai Mutume

PUB: IPS

DATE: January 17, 2001

The Inter-American Development Bank (IDB) has dispatched a team to assess damages caused by last week's earthquake in El Salvador and has approved an emergency grant of 50,000 dollars to assist the country in its relief efforts. The IDB says it is considering extending 20 million dollars in loans to El Salvador from its Emergency Reconstruction Facility. It may also accelerate the approval of a 30 million dollar loan to reform the country's public sector. World Bank president James Wolfensohn this week declared willingness to finance relief efforts in the Latin American nation shaken by a magnitude 7.6 scale earthquake Jan. 13 which has so far killed more than 600 people. On Wednesday the IDB said it had dispatched a team of specialists to El Salvador to evaluate the possibility of reprogramming existing IDB loans to support relief and reconstruction. The IDB is also expected to convene a meeting of a Consultative Group of donor nations to co-ordinate the mobilisation of international assistance for El Salvador's recovery. Under its current programme for El Salvador, the World Bank has earmarked 375 million dollars in loans for ongoing projects. But, offering loans rather than grants at a time of need is "behaving like vultures, like loan sharks," says Njoki Njoroge Njehu of the 50 Years is Enough Campaign, a civil society group working towards transforming the policies of the World Bank and International Monetary Fund (IMF). During the devastating floods that struck Mozambique last year, described as the country's worst in living memory, the Fund and World Bank responded by accelerating loans, which the country had to repay, rather than providing grants as advocated by some in civil society. Recently, the Bank also found itself warding off critics who charged that it is criminal for the institution to be providing loans rather than grants to fight HIV/AIDS in Africa as if it were financing an income-generating project. Last year, the Bank established the 500 million dollar Multi- Country HIV/AIDS Programme (MAP) for Africa to provide loans to fight HIV on the continent. Loans to a number of countries including Cameroon, Ethiopia and Kenya have so far been approved. "They know that El Salvador is in its hour of need but instead they see it as an opportunity to make money," says Njoroge Njehu. "This calls into question the role of these institutions. Are they for profit organisations or are they development agencies?" World Bank officials were not willing to discuss the nature of the financing the institution will provide to El Salvador. Estimates of the damage from the earthquake have been put at about 1 billion dollars so far in a country that has among the worst social indicators in Latin America. In 1998 per capita Gross National Product was about 1,850 dollars in the Central American nation. The country has a limited natural resource base and no remaining agricultural frontier according to the World Bank. It is the smallest country in Central America, yet one of the most densely populated. A quarter of its population lives in extreme poverty, with 60 percent of the population living in rural areas. The country's economy was wrecked by a 12-year civil war that ended in 1990. El Salvador is also in the midst of a new dollarisation programme adopted by the government of President Francisco Flores, in an attempt to modernise the tiny 6 billion-dollar-a-year economy. Under the programme, government has set aside 450 million dollars of its 2 billion dollar hard currency reserves to guarantee a fixed exchange rate and has forbidden the printing of new colon (local currency) notes. Critics say this has frozen the amount of money in circulation and some are calling for a reprieve during the earthquake emergency to inject more money into the system. IMF officials in Washington say the institution has also been in touch with authorities in the capital San Salvador with the intention of providing some form of assistance. "The staff and the authorities are continuing to discuss a possible standby programme, and in the aftermath of the earthquake, we stand ready to help --including possibly through the use of emergency assistance," says Thomas Dawson, director of the IMF's external relations department. "But I don't have any specifics on that, but we are well aware of the tragic situation there, and are standing ready to assist the authorities." The earthquake triggered massive mudslides, burying entire neighbourhoods and cutting off villages and towns from the rest of the country. Reports indicate that the death toll could reach 3,000. END top