28-29 November, Oslo
In 2005 donor governments committed to significant increases in the volume and quality of development aid. A large amount of this is likely to be delivered by the World Bank and the IMF, which are also very influential in the spending allocations of other agencies. However, economic policy conditionality imposed by the World Bank and the IMF on developing countries has harmed development in some of the poorest countries and remains a key challenge if aid effectiveness is to be taken seriously.
We welcome the Norwegian government’s decision to convene a Conference on Economic Policy Conditionality. It provides a unique opportunity to promote vitally important reform to help development in the poorest countries of the world.
We call on our governments to strongly support the process and use this opportunity to formulate positions to end tying much-needed aid and debt relief to harmful economic policy conditions.
Economic policy conditionality – continuing to damage development
When external agencies impose detailed conditions on the finance they provide for developing countries this has a series of unfortunate effects. It:
- Limits the policy space available for developing countries to determine their own policies for poverty reduction, and undermines domestic citizens’ rights in decision making processes and national sovereignty;
- Can delay poor countries from receiving much-needed resources;
- Can increase aid volatility, as resources may suddenly stop flowing if conditions are not met;
- Imposes a significant administrative burden on already over-stretched developing governments; and,
- Has often done more harm than good when it comes to poverty reduction.
There is a growing body of evidence – both official and independent – showing that conditionality has failed. The Bank’s 2005 review of conditionality agreed to the principles of ownership, harmonisation, customisation, criticality, transparency and predictability. Unfortunately, there is little evidence that the Bank is doing nearly enough to change its practice. The Bank claims a reduction of conditionality; however, this is owed, to a great extent, to the fact that interventions that CSO consider conditionalities are not labelled as such by the Bank enabling official statistics to appear more positive than it is the reality.
Recent research conducted by CSOs has found that:
- Aggregate World Bank and IMF economic policy conditions rose on average from 48 to 67 per loan between 2002 and 2005;
- World Bank and IMF continue to put conditions on privatisation and liberalization despite the acknowledged frequent failures of these policies in the past;
- The Bank does not give enough space for governments to define their own policies;
- The continuing secrecy of World Bank and IMF negotiations with borrowing country governments inhibits the development of genuine broad based “ownership” and leaves reform programmes open to the accusation that they have been illegitimately forced on governments by the Bank;
- IMF macroeconomic conditions, especially high interest rates aimed at combating moderate levels of inflation and stringent fiscal policies, impair much needed spending on social and economic development.
From Oslo to greater aid effectiveness
The Norwegian conference provides a unique opportunity for progressive governments in the North and the South to call for an immediate end to tying aid and debt relief to liberalisation, privatisation and other economic policy reforms in poor countries, and to take immediate action to make it happen.
Northern countries are collectively the major contributors to the World Bank’s concessional arm, the International Development Association (IDA); they also have an important presence on the World Bank and IMF Boards.
We urge our governments in the North and the South to show a resolute political commitment to:
- Ensuring the World Bank and the IMF adopt a policy which prevents them from imposing economic policy conditions on poor countries when providing finance and debt relief;
- Phase out harmful economic policy conditionality in WB and IMF lending practice;
- Creating forums for equitable policy dialogue between northern and southern governments based on common commitments to international human rights law and other international agreements and its implications for the goals and modalities of international cooperation and aid;
- Develop a shared strategy for action in 2007/8 (using opportunities such as the IDA 15 replenishment or the upcoming Poverty Reduction Growth Facility replenishment);
- Host a follow-up ministerial level conference on economic policy conditionality in 2007 to build on this initiative.
- Review of World Bank conditionality, by World Bank (September 2005): http://siteresources.worldbank.org/PROJECTS/Resources/40940-1114615847489/ConditionalityFinalDCpaperDC9-9-05.pdf
- Development Policy Lending retrospective, by World Bank (July2006): http://www-wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2006/07/14/000012009_20060714104555/Rendered/PDF/367720rev0pdf.pdf
- World Bank and IMF conditionality: a development injustice, by EURODAD (June 2006): http://www.eurodad.org/uploadstore/cms/docs/Microsoft_Word__Eurodad_World_Bank_and_IMF_Conditionality_Report_Final_Version.pdf
- A shadow review of World Bank conditionality, by ActionAid (September 2006): http://www.actionaid.org.uk/doc_lib/what_progress.pdf
- Challenging conditions: A new strategy for reform at the World Bank and IMF, by Christian Aid (July 2006): http://www.christian-aid.org/indepth/607ifis/index.htm
EURODAD, Regional network
ActionAid Europe, Regional network
CIDSE, Regional Network
Arbeitsgemeinschaft Entwicklungszusammenarbeit (AGEZ), Austria
British Columbia for Human Rights in the Philippines, Canada
Canadian Catholic Organization for Development and Peace, Canada
Canadian Labour Congress, Canada
Halifax Initiative Coalition, Canada
Oxfam Canada, Canada
The Social Justice Committee, Canada
Attac Finland, Finland
Service Center for Development Cooperation (KEPA), Finland
Plate-forme Dette & Développement, France
Réseau Foi et Justice Afrique-Europe, France
Cordaid, The Netherlands
SEED Europe, The Netherlands
Attac Norway, Norway
The Confederation of Unions for Professionals, Norway
Development Fund of Norway, Norway
Union of Education, Norway
Foreningen for Internasjonale Vannstudier (FIVAS), Norway
Kirkens Nødhjelp/ Norwegian Church Aid, Norway
Church of Sweden, Sweden
Alliance Sud, Switzerland
Bretton Woods Project, UK
Jubilee Debt Campaign, UK
Jubilee Scotland, UK
Jubilee USA Network, USA