Environment, Headlines, North America

ENVIRONMENT: IMF Scored on Deforestation

Danielle Knight

WASHINGTON, Jan 31 2002 (IPS) - International Monetary Fund (IMF) loans and policies have led to a dramatic increase in deforestation in biologically rich nations in Africa, Asia, and Latin America, according to a new analysis.

Environmental groups have long argued the Fund’s structural adjustment policies have led to an increase in logging exports and have encouraged cuts in government spending on forest protection.

The new report, by the American Lands Alliance, said the argument still holds true and the Fund continues to fuel logging in endangered forests in Brazil, Cameroon, Central African Republic, Chile, Ecuador, Ghana, Honduras, Indonesia, Ivory Coast, Madagascar, Nicaragua, Papua New Guinea, Russia, and Tanzania.

“The IMF’s formula of promoting export-led growth and foreign investment, while simultaneously pressuring countries to slash funding for environmental programmes, has been a recipe for accelerated deforestation,” said Jason Tockman, director of the organisation’s international trade programme.

IMF spokesperson William Murray told IPS the report seemed to be based on incorrect and old information.

Murray said American Lands ignored that the Fund has attached forest policy reform requirements – aimed at curbing illegal logging and strengthening forest protections – to some lending packages.

The IMF, he said, has even halted lending in recent years in several countries, including Cambodia and Papua New Guinea, to stop illegal logging and deforestation.

“If the government is encouraging deforestation, that’s when we step in to stop it,” said Murray. “Clearly the IMF does not promote deforestation.”

The 23-page American Lands report, however, said that forest policy reforms aside, the Fund has failed to understand or adequately assess the broader environmental impact of its structural adjustment policies.

In Brazil, for example, the government reduced spending on environmental programmes by approximately two-thirds, as part of a 41.5 billion dollar emergency loan package signed with the IMF in 1998, said the report.

As a result, the budget for the Ministry of the Environment, it said, amounted to less than three percent of the approved budget, preventing the implementation of 10 out of 16 environmental programmes in Brazil.

Many of the programmes cut had been designed to address enforcement of logging and forest protection laws in Brazil, whose rainforests comprise about one-third of the remaining tropical forests in the world.

As much as 80 percent of the logging that occurs in Brazil’s Amazon is illegal, said the report. Between 17,000 and 20,000 square kilometres of forest is destroyed each year by illegal logging and farming. Brazil’s economic crisis has further stimulated illegal logging and land clearing, it said.

“These accelerated levels of illegal logging, combined with a regulatory agency without the budgetary resources to protect natural resources, has worsened the prospects for Brazil’s forests,” said the report.

According to the report, the IMF caused Cameroon, one of the most biologically diverse countries on the African continent, to devalue its currency and cut export taxes on forest products in the mid-1990s.

“This made logging more profitable, and the larger number of species that became commercially viable resulted in higher volumes being logged per hectare,” said the report.

As a result, the number of logging firms operating in Cameroon increased substantially, from 177 to 479 between 1990 and 1998 (compared to only 106 in 1980), it said. More than 75 percent of the country’s forest cover has been logged or is scheduled to be, it said.

In the Central African Republic, the IMF encouraged the government to increase exploitation of forest and mineral resources. This helped increase the total log production three-fold from 1993 to 1999, said the report. Settlers and poachers, in turn, gained access to new areas via new logging roads, it said.

“This resulted in tragic consequences for the Central African Republic’s populations of gorillas, elephants, and rhinos,” it said. Continued human encroachment and illegal poaching, according to the report, threaten survival or two species of endangered gorilla – the western and lowland gorillas.

Structural adjustment programmes in Papua New Guinea, said the report, pressured the country to reduce government spending and the size of the civil service, resulting in the “deconstruction” of the Department of Environment and Conservation.

At the same time, the country had taken several steps recently to foster the timber industry, including reducing its tax on log exports from 33 percent to 0 – 5 percent in 1998, said the report.

“Papua New Guinea’s ability to manage its forests and control logging has been impeded by this reduction,” it said.

Malaysian logging companies, said the report, quickly moved to take advantage of these new laws in Papua New Guinea, a country that provides habitat for 200 species of mammals, 20,000 plant species, 1,500 species of trees and 750 species of birds, half of which are endemic.

The report said global protection of forests would not be possible without either a “fundamental transformation” of the approach taken by the IMF, or the removal of its ability to promote and impose policies that harm forests.

It recommended that U.S. lawmakers instruct the Treasury Department to oppose IMF loans, grants, documents, and strategies that include policies that lead to forest destruction.

It called on the international financial institution to conduct environmental assessments of all activities and policies and urged the Fund and its member nations to work towards the elimination of logging subsidies and other financial incentives that lead toward logging and forest destruction.

“Immediate action needs to be taken,” it said.

Frances Seymour, programme director for institutions and governance at the Washington-based World Resources Institute, added that under the right conditions the IMF and its sibling agency, the World Bank, could use their lending packages to promote environmental protection by including forestry policy reforms in structural adjustment loans.

In Indonesia, for example, the World Bank and IMF used structural adjustment lending to spotlight poor governance in the forest sector and forced the dismantling of forest product monopolies, said Seymour. Loan provisions also required the government to make public new maps of forest areas and to initiate “multi- stakeholder” consultations in which all proposed regulations and reforms would be publicly reviewed.

However, Seymour cautioned that the “right conditions” – including strong internal World Bank and IMF support for such measures and the willingness to bring up forest issues with the borrowing countries – are rare.

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