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World Bank Stimulus Plan to Boost African Infrastructure and Employment

The World Bank is working to promote Africa's business community and public works projects that encourage employment.

According to Shanta Devarajan, the chief economist of the Africa region at the Bank, "we gave [an emergency credit of] 100 million dollars to the Democratic Republic of the Congo, which will be used to finance two things: the maintenance of infrastructure and paying teachers' salaries.

"The other thing that can bring a stimulus to affect the poor," he continued, "is to provide financing to small and medium enterprises. About 80 percent of the labor force in Africa is in the informal sector -- many of them are small and medium enterprises.

"The participants increase as jobs in the formal sector like mines decline, so you need to maintain earnings in the informal sector in small and medium enterprise sector."

Roads and Rails

Devarajan says the institution will increase infrastructure investments to the developing world to over 45 billion over the next three years, part of that going to Africa.

One example of a large-scale infrastructure project is the North-South Corridor running from southern to eastern Africa. He says the effort is expected to bring employment and open new domestic markets, especially for landlocked countries. It will also boost Africa's exports once the global economy improves.

"One of the attractions of the North-South Corridor is there are different projects people had not been working on before but that might attract fresh new money to Africa. We need additional resources. We have aid resources, but for a fiscal stimulus we need more. The North-South Corridor might be one vehicle to finance it."

Public Works

Cash-for-work programs are another way the World Bank hopes stimulate employment and demand.

"In Ethiopia," Devarajan says, "We have a program that pays poor people in rural areas to work on building infrastructure that covers two million people and has been assessed to be quite efficient. They scaled it up first when the food crisis hit a year ago, and we've added to the wage. It's an exciting program."

Aid groups are asking that any support to the developing world by the World Bank and IMF be issued as grants, rather than loans. In recent years, debt relief from the international community has abolished the loan payments for many countries. Activists fear by accepting loans, developing countries will suffer another debt crisis.

Activists also ask that support not come with "conditionalities" like those used encouraged by the World Bank and IMF to encourage foreign investment and growth through exports, including cutting domestic spending. They fear such move would deepen countries in recession.

Devarajan says the World Bank does not impose conditions on its clients. He says it and other donors evaluate poverty reduction programs devised by national governments and agree to fund plans that are likely to work.