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How the World Bank helped the IMF impoverish Sierra Leone

25 September 2021 at 19:47 | 1268 views


How the World Bank Helped the IMF Impoverish Sierra Leone

By Mohamed A. Jalloh (USA)

Note from author: This copyrighted article was originally published by the author, Mohamed A. Jalloh, on December 10, 2005. It is the second of a twin set of articles. The first article, titled “How the IMF Fooled the Sierra Leone Government into Impoverishing Sierra Leone”, was published on November 24, 2005. This article has been updated to reflect the predicted massive decline in the value of the Leone since 2005, namely: From $1 = Le3,000 to a catastrophic $1 = Le10,000 in 2021.

The latest evidence that the nearly ten-year old government of President Ahmad Tejan Kabbah has still not yet learnt how to develop Sierra Leone was unwittingly provided by his Vice-president, Solomon Berewa, who was reported as being very happy that he had come home from a recent London meeting with promises of $800 million from the donors that keep Sierra Leone’s economy from total collapse. Mr. Berewa wanted the people of Sierra Leone to know that the money promised (over the next two years) is “not a loan.” So, it must truly be aid. Which begs the question: Is foreign aid necessarily good for Sierra Leone?

In order to answer this important question, I recently examined the role of one of the Sierra Leone government’s major benefactors, the IMF, and how it came to Sierra Leone more than 35 years ago and used its trademark ploy, devaluation, to transfer billions of dollars of our country’s wealth to Western countries.

But the IMF did not come alone — the World Bank came right along with it. This is the story of how the World Bank used its foreign “aid” to Sierra Leone, not to help poor Sierra Leoneans, but to aid and abet the IMF in the massive transfer of Sierra Leone’s immense wealth to the West.

Thereby, both institutions, with the unwitting help of the Sierra Leone government, precipitated the catastrophic economic retrogression that has now made Sierra Leoneans among the poorest people on earth.

One of the most enduring misconceptions, especially among Sierra Leone’s leaders is that the IMF is a development institution which is in our country to help us develop our economy. Nothing could be further from the truth.

What our politicians would have learned, had they been minimally diligent, is that the IMF was never intended to be in the business of developing the economies of underdeveloped countries like Sierra Leone. On the contrary, the IMF was created in 1944 at Bretton Woods, New Hampshire, here in the USA, by mainly Western countries allied against Nazi Germany and Japan during World War II, with a singular purpose: To ensure stability among the different currencies of those countries that traded with one another.

In particular, the IMF’s role was originally to maintain exchange rate stability among currencies by making sure that the value of a member country’s currency in relation to those of other members’ (the exchange rate) reflects the value established by the IMF relative to a specified amount of gold.

This system was known as the gold standard for maintaining currency stability. In 1971, the USA, under President Richard Nixon, reacted to steeply rising domestic inflation by abandoning the gold standard. Naturally, that guaranteed its demise.

It was replaced by the current system of floating exchange rates which allows the values of currencies to fluctuate.

Significantly, nowhere in the original charter of the IMF is it stated that the goal of the IMF is to help poor countries develop their economies. That role was ascribed to the World Bank, which was founded at the same time and in the same place by the same countries which founded the IMF.

This fact holds a crucial clue for solving one of the greatest mysteries regarding Sierra Leone’s inexorable descent into underdevelopment at the whim of the IMF, namely: How did the goal of helping Sierra Leone to develop its economy come to be dominated by the IMF which is not even a development institution? The answer is devastatingly simple: The creators of the World Bank planned it that way.

Indeed, the founding charter of the World Bank expressly forbids it from providing loans for development to any country that is not approved by the IMF.

And there you have it: It turns out that the scheme perfected by mainly Western countries to vastly enrich themselves at the harrowing expense of the poor countries of Africa, among other developing countries, involved no guns like those normally used in such robberies, but only ordinary carrots and a stick.

The World Bank carried the carrots; the IMF wielded the stick. And sadly for the long suffering people of Sierra Leone, their last hope for protection - the Sierra Leone government – turned out to be the unwitting donkey.

To illustrate the World Bank’s role in this scheme that has so devastated Sierra Leone’s economy, let us continue the analogy that was used in my last article to expose the IMF’s role in the gargantuan fraud against the people of Sierra Leone called devaluation:

Remember that the Sierra Leone government (“Dumbeh”) had been fooled into devaluing our country’s currency (“diamonds”) by the IMF (“DeeCee,” whose nickname appropriately stands for Devaluation Catalyst).

Consequently, Western countries (“JonBull”) became phenomenally rich overnight through an almost ten-fold increase (the extent of the devaluation) in the exchange rate of the dollar (“bread”) against the Leone (“diamonds”). As a result, every Sierra Leonean was instantly made ten times poorer, even though not a single thing had changed in the characteristics of the diamonds they produced for a living or the bread Western countries produced.

Sadly, due to the nearly ten-fold reduction in their effective income, Sierra Leoneans had become so poor that they were starving because they could now afford to buy only one-tenth of the food they used to be able to buy before the IMF fooled their government into devaluing their country’s currency.

Faced with this dire prospect, the Sierra Leone government predictably turned to the World Bank for a bailout, since, unlike the IMF, the World Bank, as its formal name (the International Bank for Reconstruction and Development, or IBRD) implies, is indeed a development institution dedicated to helping distressed countries recover from catastrophes: Even if those calamities were precipitated entirely and exclusively by the IMF! Let us continue the analogy from this point:

With the hapless Dumbeh’s household now reduced to abject poverty by DeeCee’s fraudulent scheme, he turned for help to someone whom he had been told was the friend of the poor in need - a relative of DeeCee with a rather ominous name: CongoSah.

But Dumbeh, a devout follower of the ancient Sierra Leonean faith (“How for do - God dae”), strongly believed in the adage: “What’s in a name?!” So, he ignored the implications of CongoSah’s name as blissfully as he ignored the fact that CongoSah and DeeCee were blood relatives! Like the proverbial lamb to the slaughter, or the Biblical Daniel to the lion’s den, Dumbeh walked the long miles to knock on CongoSah’s door.

“Oh, hello there, old chap,” said CongoSah in the friendliest voice as he opened his door so widely that he almost knocked the now very frail Dumbeh off his tired feet.

(CongoSah’s door opened not inwards from the inside, as normal doors do, but outwards – another ominous sign that the now almost-blind-with-hunger Dumbeh understandably missed). Dumbeh gratefully collapsed into the waiting hands of this friend of the poor, CongoSah, as he blurted out his household’s harrowing ordeal at the hands of a Godless stranger. CongoSah assured Dumbeh that he had done the right thing by going to him for help.

He told Dumbeh: “I am going to give you, my dear friend, enough bread to feed your household for the next 20 years – 10,000 loaves of bread. That is 500 loaves a year for 20 years! But that’s not all I will do for you. Since you are now so weak, I will not charge you any interest. All I ask is that, at the end of twenty years, you pay me back with your diamonds for my 10,000 loaves of bread. Fair enough, old chap?”

Dumbeh could hardly believe his ears! What a sudden change of fortune, he thought. Through his slowly lifting fog of hunger, he also thought to himself: How could DeeCee and CongoSah be blood relatives when they are as different in their behavior towards my household as the difference between night and day? Dumbeh would have been even more flabbergasted had he known that DeeCee and CongoSah were actually brothers! But he found out soon enough, just as he was leaving CongoSah’s comfortable house to start the long trek back to his own devastated household.

“Oh, old chap, one thing I do have to tell you …,” started CongoSah, as he shook hands with a now ecstatic Dumbeh. But the grateful Dumbeh didn’t let him finish his sentence. “Anything you say is fine with me!” he gushed in gratitude.

“Oh, I am so relieved to hear you say that,” said CongoSah. “You see, although I am willing to give you all the bread your household needs for the next 20 years, at no interest, as long as you pay me back in 20 years’ time, I do have to obtain my brother’s written permission to do so. This is because our parents made that a strict condition in their Last Will & Testament when they left me all this bread for me to help the poor.”

“No problem,” replied the blissful Dumbeh. “Where do we find your brother?”

“Right next door to you!” replied CongoSah. Upon hearing that, Dumbeh’s newfound euphoria suddenly evaporated. “You mean Dee-, Dee-, DeeCee is your brother?” he asked in a hushed stammer, trembling with unequal amounts of fear and apprehension. “Oh yes, old chap,” replied CongoSah happily.

“Same father, same mother! Born on the same day, at the same time and the same place! Isn’t this a small world, me lad?” By then, of course, Dumbeh had already fainted.

When he woke up in a warm, clean hospital, surrounded by beautiful white-clad nurses, he discovered, to his chagrin, that he was not in heaven, but still very much alive. And so were his household’s problems. So, thinking that he had no way out, Dumbeh swallowed his pride, thanked God for making him and his household the poorest people on earth (how else, he thought could he have fed his starving household with CongoSah’s “free” bread?), and agreed to let DeeCee approve CongoSah’s offer to him.

And that is how Dumbeh and his hapless household came to suffer the same fate at the hands of the same culprit for the second time in a row! For, DeeCee, true to his name (Devaluation Catalyst) insisted that he would only agree to his brother, CongoSah’s offer to save Dumbeh’s household from certain death due to starvation that he (DeeCee) had exclusively precipitated through his devaluation of Dumbeh’s diamonds, if – you guessed it – Dumbeh would again devalue his diamonds even further!

Still thinking that CongoSah was his household’s only salvation, Dumbeh agreed. As for DeeCee, knowing that he had Dumbeh’s back against the wall, he insisted this time around that Dumbeh agree to accept not one slice out of the ten slices of bread of the single loaf that Dumbeh used to receive in exchange for his one carat of diamonds, but one-tenth of a single slice! In effect, DeeCee thereby devalued Dumbeh’s diamonds from an exchange rate of 10 carats for a loaf of bread to an astonishing 100 carats for the same loaf – a devaluation of almost 10,000% (9,000%, to be exact)! This was in addition to the earlier devaluation of almost 1,000% (900%, precisely, when DeeCee had fooled Dumbeh into agreeing to surrender 10 carats of his diamonds for the same one loaf of bread that he used to receive in exchange for one carat of his diamonds.

And that is how Dumbeh, 20 years later, came to owe CongoSah not 100,000 carats of diamonds for the loan of 10,000 loaves of bread that CongoSah had given him two decades earlier (after DeeCee’s first devaluation Dumbeh had to pay 10 carats of diamonds for a loaf of DeeCee’s bread), but 1,000,000 (one million) carats of diamonds – due to DeeCee’s opportunistic second devaluation of 10,000%! Of course, that event was directly precipitated by CongoSah’s insistence that he would only provide aid to Dumbeh, if, and only if, DeeCee approved of Dumbeh’s request. Naturally, DeeCee would only approve Dumbeh’s request if he agreed to DeeCee’s predictable terms, which, as his full name (Devaluation Catalyst) implied, meant another devaluation of Dumbeh’s diamonds!

So, what started out as a simple transaction involving Dumbeh’s purchase from the opportunistic DeeCee of a winter coat that he did not need for 100 carats of his diamonds, has now, 20 years later, ended up costing Dumbeh’s household more than 10,000 times more (one million carats for repaying CongoSah’s loan of 10,000 loaves of bread alone!)

That, in a nutshell, illustrates how the World Bank (“CongoSah”), an institution explicitly charged with helping poor countries such as Sierra Leone, ended up using its foreign “aid” to Sierra Leone to aid and abet its sister institution, the IMF (“DeeCee”), which is not a development institution, to massively impoverish Sierra Leone (“Dumbeh”) by siphoning off billions of dollars of Sierra Leone’s wealth through the IMF’s trademark ploy - devaluation.

To get a true perspective about the resulting massive damage to Sierra Leone’s economy over the past three decades, note that the above example assumed a devaluation contrived by the World Bank through the agency of the IMF, of less than 10,000% (from one carat of diamonds = 1 loaf of bread to 100 carats = 1 loaf.) However, our currency has been devalued and subsequently has deteriorated through the revolving IMF-World Bank-IMF tango by a staggering 375,000% (from Le 1 = $1.25 in 1973 to Le3,000 = $1 now). Through their self-enriching and immensely profitable (only to themselves) concerted scheme, the IMF, the World Bank, and their mainly Western benefactor countries became fabulously rich. And the people of Sierra Leone have became commensurately dirt poor.

[Author’s Note: Currently in 2021, the exchange rate is $1 = Le10,000, representing a loss in the value of the Leone of more than 1.2 MILLION percent from the ill-advised IMF-instigated 1979 devaluation of the Leone and its aftermath. That devaluation and subsequent devaluations of the currencies of many other African countries in the 1980s were instigated by the IMF and the World Bank as the bedrock of the latter’s one-size-fits-all Structural Adjustment Programs (SAPs). It is now a proverb of infamy that those SAPs have catastrophically sapped many African countries’ economies and devastated the lives and livelihoods of hundreds of millions of innocent Africans.

However, it took the World Bank and the IMF more than two decades to disavow those same SAPs as devaluation at their core took a hair-raising toll on millions of Africans. Only in the next century - in 2001 - did the World Bank and the IMF finally admit publicly that their devaluation prescription at the core of their SAPs in Africa had been a “mistake” all along. See, “World Bank admits mistakes in SAP implementation”

To reiterate the catastrophic damage the World Bank snd the IMF did to African countries, the World Bank and the IMF waited 22 years after I had first clearly and publicly warned them that devaluation - a potent cure for balance of trade problems in developed countries - would never work in the very different economy of Sierra Leone and of similar African countries - before they finally admitted that they were wrong about devaluing the currencies of African countries.

That egregious error of commission over those 22 years by the IMF and the World Bank - which has caused hundreds of billions of damage to victimized African countries including my native Sierra Leone - constitutes the unshakable basis for an irrefutable claim for hundreds of billions of dollars in compensation to those African countries to be paid by the two Bretton Woods institutions.

Yet, up to the present time, the IMF and the World Bank have unconscionably refused and failed to pay the hundreds of billions of dollars they owe in damages to their victimized African countries including Sierra Leone.]

So, who bears the greatest responsibility for the pathetic paradox of Sierra Leoneans wallowing in abject poverty amidst an abundance of minerals and other natural resources? If you answered that it is the IMF, aided and abetted by the World Bank deliberately, and, to a lesser extent, by the Sierra Leone government, unwittingly, you would be absolutely right.

© Copyright 2005-2021 Mohamed A. Jalloh