When Paul Wolfowitz became president of the World Bank in June, there was widespread concern that he would be tough, uncompromising and bad news for the world's poorer countries. If the World Bank's stance on Ecuador is anything to go by, these fears appear to be well founded.
In August, the Bank suspended at the last minute a $100 million loan to the Andean nation. This was done because Ecuador will divert some of its oil revenues away from debt reduction to social spending. The Bank reckons that by altering the oil stabilization fund's aims, Ecuador will be unable to achieve some of the promises agreed in its fiscal loan programme with the multilateral.
This reasoning is disingenuous. As Ecuador's finance minister at the time, Rafael Correa, said, the country had kept its agreement with the Bank, which says that 70% of the oil stabilization fund should have been used to pay down debt until September 2004.
In any case, he added, it is none of the Bank's business if Ecuador decides to change the spending strategy for its surplus oil revenues. "We are a sovereign country. Nobody can punish us because we are changing our own laws," he said.