Erging auch an: Mr. G.E. Gondwe (Director, African Department) und Mr. James Wolfensohn 
(President World Bank) 


Managing Director
International Monetary Fund
700 19th Street, N.W.
Washington, D.C. 20431 24.04.2002


Dear Mr. Köhler, 


We thank Ms. Kathleen White of the External Relations Department for her response to the international sign-on letter on water sector reform in Ghana. However, it appears that neither yourself nor the members of the African Department take the concerns of international civil society organizations very seriously. The statements and concerns in our letter, dated February 19, 2002, still stand. Nothing in Ms. White's reply even begins to be persuasive enough to convince us otherwise. Allow me to respond to her letter point by point.

First, on the fundamental question of public debate and public participation in key policy decisions such as the provision and management of water services. Ms. White's reply states that " we would endorse the principle that key policy choices should be subject to public debate and participation, as you suggest." Unfortunately, the twenty-year history of IMF structural adjustment programs around the world belies this statement. Time and time again, in country after country, key policy decisions have been made in closed-door meetings between IMF officials and Finance Ministers without the benefit of citizen participation. And, this is precisely what has happened in Ghana. We are certain that you and the members of the African Department are well aware of the fact that the last two tranches of Ghana's IMF loan (the fourth tranche and the fifth tranche) from the Poverty Reduction and Growth Facility include conditions related to implementation of full cost recovery and automatic tariff adjustment formulae for electricity and water. These, like many other key policy decisions, have not been subject to broad-based citizen participation.

Second, Ms. White's reply states "we have, in fact, supported the proposals drawn up by the independent Public Utilities Regulatory Commission (PURC) to move to full cost recovery, and to adopt automatic adjustment formulae to keep tariffs in line with the costs of water provision." 
Yes, the Ghana Public Utilities Regulatory Commission is a constitutionally-mandated independent agency. Perhaps it should be considered inappropriate for the IMF to use its leverage through loan conditionalities to meddle in the internal affairs of an independent agency. The IMF states that this pricing reform (full cost recovery and automatic adjustment formulae) is "necessary to safeguard macroeconomic stability." Does this mean that it is outside of the purview of the PURC to make this decision? By stating that the PURC's implementation of full cost recovery and automatic adjustment mechanisms will be a condition for completion of the fourth and fifth review of Ghana's IMF loan, the IMF is again undercutting the possibility of a participatory decision-making process. As a constitutionally mandated independent agency, the PURC has the responsibility to be accountable to the citizens of Ghana, not to the dictates of the IMF - even when the IMF places substantial pressure on the independent agency, and the government, through the imposition of loan conditions of this type.

Third, Ms. White states that "the PURC's plan was developed through extensive consultation with civil society in Ghana." As you are well aware, the pressure toward water privatisation and full cost recovery in Ghana has generated some serious opposition within the country. A broad cross-section of Ghanaian civil society, including women's groups, teachers, trade unions, public health workers and students, have raised concerns that full cost recovery and automatic adjustment formulae could have serious negative impacts on public health, women's work, and access to clean and affordable water. While, as you say, consultations with civil society have taken place, it would be an exaggeration to label them "extensive." But, more importantly, it is clear that the dissenting opinions voiced during those consultations have not swayed the IMF's decision to require the PURC to implement full cost recovery and automatic adjustment mechanisms. This is evidenced by the fact that the same conditions have been imposed on the PURC in the fourth and fifth tranche of the IMF loan.

In a country where 60 percent of the population earns less than US$1 a day and more than two-thirds of the population earns less than US$2, continued price hikes in the cost of water are not just an idle concern. Access to clean water is a life and death matter. As you might imagine, emotions run high on the matter. A regional coordinator of the Ghana National Coalition Against the Privatisation of Water stated recently in a letter to the World Bank that automatic tariff adjustment formulae would be "a deadly poison and a prescription for death for the poor! How on earth can PURC be strengthened if you are prescribing the formula for them."

On a final point, Ms. White states that, "the government indicates in its latest letter of intent under Ghana's PRGF arrangement that it is considering the provision of targeted subsidies to "buy down" water rates for the poor." Universal access to water and sanitation services should be considered a basic human right. It should not be a charity that can be doled out by governments as "targeted subsidies" to those that fulfill the "needs-based assessment" of some administrative bureaucracy. Rather than impose full cost recovery and automatic adjustment mechanisms that will then require that the government "buy down" water rates for the poor, perhaps there should be a re-consideration of the basic IMF and World Bank prescription. It might even be cheaper to actually provide the funds to rehabilitate the aging infrastructure of the Ghana Water Company, Ltd.

Regards,

Elfriede Schachner 
secretary general 

AGEZ (Working Association for Development Cooperation) comprises at present 29 development NGOs which work together in order to improve the qualitative and quantitative standard of Austrian development cooperation and policy. 
AGEZ is an independent and critical forum vis a vis governmental policy and wants to strengthen the position of NGOs within the Austrian development policy. AGEZ is financed by contributions of its members only.