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EDITIONS
Wednesday, 25 September, 2002, 22:03 GMT 23:03 UK
Developing states 'hooked on aid'
Protestors outside IMF headquarters protest tobacco sales in emerging nations.
For many countries, aid is a tough habit to break

An evaluation of lending programmes has concluded that many countries have become stubbornly reliant on aid from international lending bodies.

The report, produced by the Independent Evaluation Office (IEO) of the International Monetary Fund (IMF), also found that prolonged use of IMF initiatives has expanded considerably over the past two decades.

"Prolonged use is a large, growing and persisting issue," said David Goldsbrough, IEO deputy director.

"It raises questions about the effectiveness of programmes."

The report noted that while most prolonged users were low-income countries, protracted use was also a feature of so-called middle-income nations, such as the Philippines.

Such examples showed that long-term use of IMF resources was not always of concern, Mr Goldsbrough said.

Self determination

For the purposes of its report, the IEO defined "prolonged users" as countries which had been involved in IMF programmes for at least seven years in any 10-year period.

By that definition, about one-third of all countries are long-term users.

What is more, relatively few countries managed to escape prolonged use status once achieved, Mr Goldsbrough said.

There were several causes that led developing nations to become regular customers of IMF programmes.

They included factors specific to each nation, including deep rooted economic problems, which generally took considerable time to resolve.

Also, international pressure on the IMF to involve itself to a greater degree in assisting low-income countries meant many more states had become dependent on aid.

Poorly designed programmes that failed to take into account a country's need for self determination represented yet another issue that contributed to prolonged need for aid.

Key findings

In making its findings known on Wednesday, the IEO made a number of recommendations.

It urged the IMF to adopt an explicit definition of "prolonged use".

Such a definition, the IEO board said, would improve IMF processes for deciding whether additional aid had any probability of success.

IEO chiefs also said the fund should adopt clearer definitions over lending decisions.

For example, while some aid was offered because of extreme economic strife, other countries received assistance for political reasons, based on IMF management decisions.

Among other recommendations, the IEO said the IMF should take steps to reduce staff turnover, ask for more input from countries benefiting from aid and in turn demand greater institutional reforms.

Wednesday's report was the first in a series of three IEO reports.

The two forthcoming reports, scheduled for release in April, will explore other topics including the financial crises of Brazil, Indonesia and Korea.



Developing countries

World economy
See also:

25 Sep 02 | Business
23 Sep 02 | Business
19 Sep 02 | Business
19 Sep 02 | Business
24 Sep 02 | Business
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