WASHINGTON (Thomson Reuters Foundation) - The World Bank and the International Monetary Fund (IMF) should halt their lending to poor countries that are rich in natural resources but fail to disclose how they use those revenues, Daniel Kaufmann, president of Revenue Watch Institute, said on Monday.
Calling resource revenues the development challenge of our generation, Kaufmann said that 20 percent of the world’s poor surviving on less than $2 a day live in countries rich in natural resources, many of them in sub-Saharan Africa. With vast new reserves of oil and gas discovered in the region, its poverty level is poised to increase to 50 percent of the world’s poor by 2030, unless there are major improvements in corruption and governance, he said.
“The World Bank should be audacious,” said Kaufmann, a former World Bank Institute official who now heads a research group that promotes accountability over management of natural resource revenues to help countries realise their development benefits.
Nigeria, for example, said last week it cannot account for $50 billion in revenue from the sale of crude oil between January 2012 and July 2013 - an amount that exceeds the total annual foreign development aid to the region. In Angola, the IMF has estimated that $32 billion in oil revenues went missing between 2007 and 2010, equivalent to one quarter of its GDP, he said.
“At what point does one bite the bullet and say, ‘This is absolutely crucial in getting development on the ground’? The World Bank with its unique resources, along with the IMF, should have the audacity to say, ‘No, we are not lending when there is complete opacity on these issues,’” Kaufmann said.
He made the remarks in presenting a detailed framework for addressing corruption and improving governance in resource-rich countries at a World Bank seminar on Monday.
While the World Bank does address corruption in its lending programmes and sanction companies for misuse of funds, Kaufmann said that is not enough. It should not address corruption merely as a fiduciary duty but also as a developmental priority.
“What we are talking about is $350 to $400 billion in domestic resource mobilisation just from oil (revenues), and leveraging that and approaching it from the development standpoint would totally dwarf whether a dollar (in World Bank lending) went to its proper destination,” he said.
The World Bank had no immediate comment. The IMF noted that its policy is to emphasise good governance when providing policy advice, financial support and technical assistance to countries.
At the global level, there are range of initiatives aimed at increasing transparency and governance of natural resource wealth. The G20 group of the world’s leading economies has encouraged transparency, and 41 countries participate in the Extractive Industries Transparency Initiative, a government, corporate and civil society coalition that sets global standards for openness in the managing revenues from natural resources.
The United States and the European Union, meanwhile, have passed legislation requiring publicly traded companies to disclose their payments to governments for resource extraction.
But the track record of resource-rich countries on accountability remains wanting. 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 percent fail to achieve good governance in their extractives sector. Only 11 of the 58 countries examined in the index were deemed “satisfactory”.