AddisFerengi

The following document presents the World Bank's Protection of Basic Services Project - PBS-. Its latest version (May 2006) can be downloaded at http://worldbank.org/et/ in English, and Amharic.

Though Ishac Diwan, Country Director, keeps telling us: "The World Bank is channeling resources to the poor through an investment project vehicle." I doubted very much reading block-grants will now be channeled through... regions. Somebody has to explain me the difference between regional governments and the Federal one since TPLF and its puppies are controlling all of them.

Meles and his clique are apparently granted a bonus for massacring their people, silencing all dissents, suppressing independent Medias, jailing the opposition leaders and now, blocking access to our last space of Freedom: the web? I am afraid so but since I am, by no way a specialist, I decided to interview an expert.

AF: Dear I (for “Interviewee”), I think I can say, without compromising your wish to stay anonymous, that you have a PhD in economics and have thought a lot about economic development matters, including those pertaining to Ethiopia.

I: Hi Addisferenji. Yes, that’s the case.

AF: I have forwarded you a pdf document and asked you to have a look at it; I would like to ask you a few questions on economic matters. Is that fine?

I: Sure, please go ahead!

AF: Sanctions - cuts in budgetary support- were taken by donors against Meles Zenawi ‘s regime by some DAG members, other donors claim they never gave any direct budgetary support and can in no way be accused of supporting repression in Ethiopia. The regime however, though heavily dependent on International Aid, is still surviving and busy suppressing all dissents. How do you explain this when the price of oil has dramatically increased and when military and propaganda expenses are astronomic? Where do they get foreign currencies to buy brand new Ural trucks? How can they afford national « Revolutionary Democracy trainings », plasma screens for teachers’ « training » in High Schools etc?

I: You raise a lot of issues here, and so I’ll react briefly on each. It is the case that some donors have cut budget support to the Ethiopian government, for example the EU. And it is true that the US never provided budget support to begin with. This, however, does not mean that they can in no way be accused of supporting repression in Ethiopia. Support of repressive governments can come in many forms, not merely through budget support. Those following the actions of State Department diplomats like Yamamoto, Frazer, and Huddleston know what I mean.

The continued suppression of dissent and the price hikes are not necessarily contradictory to each other. Various reasons have been given for the increases in food prices, and probably multiple factors are indeed in play. One of these is likely to be political instability. As to your question about where they get foreign currency from to undertake all those purchases, foreign currency comes in in the form of foreign aid, but also from exports. It is, I would say, simply reflective of the EPRDF’s priorities that in this time of stress and fiscal and foreign currency shortage they decide to spend inordinate amounts on political “training” of 260,000 teachers, other similar political inculcation sessions, military and security ware, etc.

AF: Westerners, including some EU states according to my own sources, are likely to choose the PBS – Protection of Basic Services – strategy. Do you support the PBS project, do you think it is the right step donors should take to help « Ethiopia ‘progress towards MDG targets in human development » (1)?

I: I am deeply disappointed and troubled by the decision the World Bank has taken with the PBS. Let’s quickly recap the path that recent aid negotiations have taken with regard to budget support. After the November 2005 brutalities, after the entire opposition leadership was arrested by Mr. Zenawi’s regime, and after the arbitrary and sweeping roundup of over 40,000 people from the streets of Addis and elsewhere, the donors took a principled stand and declared that they will withdraw direct budgetary support to the Ethiopian government. This was spilled all over the international press with great fanfare. “Budget support”, in aid industry jargon, refers to financial aid given not directly for specific development projects (e.g. the building of rural roads, etc.) but rather provided to the government more or less blank-cheque style, with the hopes that the government will use the overall government budget for tackling poverty as opposed to less savory things. The Donor Assistance Group (body that represents the donors giving aid to Ethiopia) stated that the drastic violation of human rights and basic democratic principles constituted a breach of trust, which made it impossible for them to continue budget support. They said they would funnel the money instead through non-government bodies, UN development agencies, etc. to see to it that aid actually reaches the poor.

But then in March, the World Bank came up with a plan as to how to use the originally withdrawn budget support. This plan is reflected in the document you refer to, and takes the form of the so-called “Protection of Basic Services” (PBS) project. It was both surprising as well as deeply troubling that this project shows that the Bank and other donors intend to effectively renege on their promise of December. As you can see, the PBS does not provide aid through non-state actors. Rather, it is budget support all over again, if not in name, so certainly de facto – only this time, rather than funnelling money into the federal budget, they will do so into the regional governments’ budgets.

AF: I quite agree with it. Can you confirm the details of our last conversation when you told me the World Bank staff’s careers and annual evaluations depended on how much money they had spent during the year? Truly worrying… if they are guided by personal interests, no?

I: Yes. To begin with, one must ask the question why the World Bank and the bilateral institutions that are planning to pitch in into the PBS (Canada, Ireland, UK, even the EC!, and possibly others) are undertaking an action that they know will mean that aid money will not reach the poor in Ethiopia effectively, and that they themselves publicly declared as unacceptable a few months ago. I am afraid a likely strong driver of that is the incentive structure in aid agencies like the World Bank, starting from the project manager, going up to the country director, all the way up to the vice president for the Africa region. The way that professional success, and therefore promotion, professional recognition, etc. is measured is by how much aid money the task manager, country director, etc. is able to disburse per year. It is not that that is the only indicator used for work performance, but it’s a critical one.

With Ethiopia being one of the biggest aid recipients in Africa, bureaucrats in aid agencies are rather loath to follow through with their principled stand and channel the original budget support aid through nongovernment actors or at least insist for that aid to finance specific development projects. Prime Minister Zenawi is full well aware that donors are desperate to push aid out the door, and told them that it’s either budget support (whether through the federal, regional, or wereda governments) or they can go back home with their money (see an interesting account of this on adebabay.blogsource.com). It appears that they buckled under this blackmail and agreed to funnel resources as quasi-budget support.

It’s not only the World Bank that’s in this alone. All donors are eager to push their money out the door, but since no one wants to be seen supporting EPRDF on their own, they are all pushing the Bank to go ahead with the PBS so they can hide their money within that project. Meles knows like a pro which donor is how desperate to push money, and he plays them like a violin.

AF: If I understood correctly, money will be channeled through regions and not woredas and the general idea is to give block-grants and not standard development projects, can you correct if necessary and clarify what block-grants are?

I: In the Ethiopian context, block grants usually refer to the fiscal transfer made from one tier of government (e.g. the federal government) to the next-lowest tier (e.g. regional governments). These transfers, or block grants, constitute the lower tier government’s main source of revenue, which which they finance the usual public services in health, education, security, and other sectors. In the case of the World Bank’s project document, block grants refer not only to these intergovernmental transfers, but also to grants that the PBS would make to the regional government. I.e. PBS would supplement the federal grants to the regions with aid grants to the regions.

AF: Would you say block-grants equal budgetary support?

I: Yes, in the context of the PBS, I would say it functions practically as budgetary support for the regions’ budgets. The World Bank was crafty enough not to classify the PBS as budget support, but as an “investment project”. That however doesn’t change the substance of the loan: that it channels resources into regional governments’ coffers, with very limited accountability of how these funds are used, and with the use of the government itself to monitor resource allocation – effectively, the government monitoring itself.

It’s worth noting that the project description of the PBS made available to the public is very vague. For example, the PBS supposedly has a component to empower citizens to have a voice to demand rural services. This component is very much played up by the Bank. However, it constitutes less than 1% of total project funds, but you wouldn’t know that from the pdf file, I found that out elsewhere. In contrast, the regional budget support component makes up over 90% of project resources. Besides, it is rather unclear how the Bank wants to increase the voice of the Ethiopian poor to demand services, while at the same time providing heavy financial support to the regime that has just displayed its solid determination to take away the voice of Ethiopians, rural and urban, poor and better off.

I believe it is incumbent upon all of us to contact the World Bank and press them to provide more information about what the details of the PBS are: How would the use of aid money be monitored? Why do they renege on their own promise to cut budget support (given that this supposed investment project is clearly a form of budget support in disguise), a promise based on their own assessment that the Ethiopian government was not trustworthy enough to give blank cheque aid to?

AF: Do you think financing the regions rather than the Federal Government will make any difference?

I: Not really. If the original reason for withdrawal of budget support was that the donors felt the Ethiopian government broke their trust, and thus no longer felt it was safe to provide aid in the form of a quasi-blank cheque, then what trust do they have to give regional governments a more-or-less blank cheque? What faith, furthermore, do they have in the federal government (in the form of the federal finance ministry) being the sole monitor of what regions do with the money? Each and every regional government is controlled by the very same ruling party, EPRDF, that had broken the donors’ trust! Whether they provide aid to the federal or the regional governments, the former are tightly controlled by the latter, so donors have in a sense deceived both the Ethiopian people and their own taxpayers by structuring the PBS the way they did.

AF: What about those new accountability mechanisms in a country where even little children call Meles and his clique: «Leba»?

I: The so-called accountability mechanisms in the PBS are substantially weaker than in the case of a typical investment project. The PBS is much closer to a blank-cheque budget support than it is to an investment project with funds earmarked for specific purposes. Also interesting is that the PBS is among the 4 largest loans ever given to Ethiopia since the World Bank’s existence! Even if one were to adjust the loan sizes for inflation, PBS would come out pretty high up there in size. Where some other despots face outright halting of all but humanitarian aid, is this the time to reward the government with its 4th-largest loan ever?

The schoolchildren, who get beaten, arrested, and tortured for protesting and calling the regime “Leba” simply show the utter lack of faith of the population in the government. These children’s voices sometimes speak volumes more than donors’ ‘governance assessment reports’ about whether the regime is governing the country respectably or not.

AF: Any suggestion for those lobbying in Diaspora who want to avoid such a disastrous decision?

I: The PBS -- which is not only a big chunk of money but also signifies something of a sign of confidence, a “we stand by you” message by the donor countries – is unfortunately already going to be presented to the Bank’s board of director on 25. May. The Board is for the most part a rubberstamping entity, it has nearly never rejected a loan put before it. In Washington DC, some activists are calling for holding a demonstration in front of the World Bank on that day. It is actually quite stunning how the Ethiopian community abroad, otherwise monitoring Western governments’ moves concerning Ethiopia with eagle eyes, has been completely absent from the donors’ scene until very recently.

This is an absolutely critical time at which we, especially the diaspora Ethiopians residing in those countries where the donor agencies plan to contribute to the PBS (i.e. the World Bank located in the US, and Canada, Ireland, the EC, the UK, and others), must show the donors that we are aware that they are about to break their promise to the Ethiopian people. We must apply high pressure that they adhere to the principled stand they took in November, and do not provide budget support to Mr. Zenawi’s government – neither to the federal government budgets, nor the regions’ budgets, nor district governments’ budgets. While the World Bank is pretty determined to go ahead, other donors could possibly still be convinced otherwise. Also, projects have been stopped or heavily modified midstream (one recently was stopped in Ethiopia), hence applying pressure to the Bank is critical as well.

Currently there is practically no avenue for poor people to freely articulate their needs and priorities to the government. We saw in May 2005 that the rural poor are not given the political voice they need to provide feedback to the government about what policies they believe would increase their welfare. Given that they have no political voice, Ethiopians in poverty have no way to hold officials accountable for the delivery of the basic services that are crucial to their survival. The PBS, if it goes through in its current form, negates the voices of the poor, by giving aid and comfort to a regime that disregards the poor’s voice and violently suppresses them when they do try to articulate their needs. In this sense, the so-called “Protection of Basic Services” project would make a mockery of its own name.

Several Ethiopians are trying to raise awareness of these issues, by posting and distributing the flyer and article below, including to the World Bank. Please do so as well, and most importantly of all, please contact the World Bank officials responsible for the PBS and tell them that they should not break their promise they expressed to the world that they would no longer provide budget support to the Meles Zenawi regime which is likely to use it for purposes that have nothing to do with helping Ethiopia’s poor, and that they should channel resources instead through non-government agencies.

Concerned Ethiopians, please read...

http://www.ethioforum.org/pdf/Stop_budget_Support.pdf
http://www.ethioforum.org/pdf/eaca-%20Flyer.pdf

... and contact

eacadvocacy@gmail.com

for any supplementary information.

AF

(1) This sentence truly makes me sick !

Berhanu Haile was condemned to five years of imprisonment on fabricated charges for being Kinijit. He was arrested the 27th of January. He is a father and a husband.