Kicking de Habit.(4) Conclusion & Recommendations.
Conclusion and Recommendations
Aid should not be used as an opportunity for donors to push specific economic policies on developing countries, engaging unnecessarily in internal affairs and micro-managing reform from the outside. This is not only beyond the mandate and expertise of donors, but undermines country ownership, resulting in often inappropriate and unsustainable reforms. In addition, attaching reforms to aid can delay aid flows and make aid more unpredictable.
The World Bank and IMF’s insistence on cotton sector liberalisation and a new price setting mechanism has resulted in a 20 per cent drop in the price of cotton – a crop that sustains the livelihoods of three million Malians. According to the World Bank, it is estimated that in the long run this drop will result in a 4.6 per cent increase in poverty across the country.
Specific recommendations
If the promises to increase the quality and quantity of aid by $50bn worldwide are met in the next four years, this will be the most important and rapid expansion of overseas development assistance since its inception. It is vitally important that this new money delivers results for poor people, helping to give more people in developing countries access to education, health care, food security, and water.
Aid should not be used as an opportunity for donors to push specific economic policies on developing countries, engaging unnecessarily in internal affairs and micro-managing reform from the outside. This is not only beyond the mandate and expertise of donors, but undermines country ownership, resulting in often inappropriate and unsustainable reforms. In addition, attaching reforms to aid can delay aid flows and make aid more unpredictable.
The World Bank and the IMF, despite several attempts at reforming their conditionality, are still attaching inappropriate economic policy conditions to their lending. In the case of Mali, the World Bank and the IMF’s predictable reaction to privatise the Malian water and electricity company in the face of problems in the sector, failed to deliver results. Electricity coverage did not expand and prices increased to the highest in the region.
The World Bank and IMF’s insistence on cotton sector liberalisation and a new price setting mechanism has resulted in a 20 per cent drop in the price of cotton – a crop that sustains the livelihoods of three million Malians. According to the World Bank, it is estimated that in the long run this drop will result in a 4.6 per cent increase in poverty across the country.
A new approach to conditionality
As the case studies demonstrate, there is a need for a new approach to aid conditionality. Donors should be able to expect transparent accounts of how their aid money has been spent. This should not be labelled as a condition, but rather a contractual obligation, as this is a core element of the contract between the donor and recipient country, just as it would be the case with a loan made in the private sector. Beyond such contractual obligations donors should stop prescribing detailed economic policies and instead move to a simple set of broad poverty-reduction goals or outcomes. These goals would be mutually agreed with the country government; goals such as 20 per cent more mothers will have access to a trained midwife, for example.
As the case studies demonstrate, there is a need for a new approach to aid conditionality. Donors should be able to expect transparent accounts of how their aid money has been spent. This should not be labelled as a condition, but rather a contractual obligation, as this is a core element of the contract between the donor and recipient country, just as it would be the case with a loan made in the private sector. Beyond such contractual obligations donors should stop prescribing detailed economic policies and instead move to a simple set of broad poverty-reduction goals or outcomes. These goals would be mutually agreed with the country government; goals such as 20 per cent more mothers will have access to a trained midwife, for example.
Donors can be one player involved in the discussions of the range of policy alternatives that may reach these goals, but they should stop the practice of making their aid conditional on specific policy paths. Such outcome-based conditionality would stop donors from imposing specific policies and engaging unnecessarily in the internal affairs of developing countries, instead allowing them the space and freedom to decide on their own reform paths. It would also ensure a focus on poverty-reduction results. Government progress would be assessed according to what policies have actually delivered on the ground, rather than on whether or not they have matched up to an ideological framework, and there would be an ongoing opportunity for modification of policies according to what has worked. In addition, ensuring that outcome-based conditions are transparently produced and reviewed means that parliamentarians and citizens in recipient countries can better hold their own governments to account, reducing the opportunity for corruption and inefficiency.
Although there are a number of concerns about the use of outcomebased conditionality (see Box 4), the European Commission has witnessed some positive results when using this mechanism. The findings from a pilot study in Burkina Faso showed that outcome indicators have shifted the focus to results. For example, despite ten years of increasing sectoral budget allocations and donor support to the health sector, attendance rates at health centres had steadily decreased. Only when outcome-based conditionality was commenced, did it become clear that just a small percentage of the allocated budget had been reaching the decentralised level, causing a major problem. The pilot also found that outcome-based conditionality enhanced country ownership.
There are a number of concerns about the use of outcome-based conditionality around issues of attribution, timing, and data. Firstly, there are concerns about the difficulty of assigning responsibility for a given outcome to a government’s actions or lack of action. For example, it could be that a government fails to achieve a ten per cent increase in rural poor peoples’ access to water because of a drought, rather than lack of investment in expanding water infrastructure. However, independent assessments of progress could be established, which would clearly show to what extent the government was responsible, and the extent to which unforeseen factors were the reason for either success or failure.
Another concern is that current conditions will simply be replaced by shortterm indicators of progress towards an agreed poverty outcome. These indicators could undermine policy space by being overly prescriptive; effectively economic conditionality by another name. Donors must avoid this by agreeing to a simple set of interim targets, which do not push specific policies. An example of this would be: 50 per cent more girls enroll in primary school by 2009 as a staging post to every girl completing primary education by 2015.
Lastly there are concerns that the data does not exist to measure progress toward outcomes. However, there are increasing numbers of national household surveys being carried out, and a constantly improving data set. Much more needs to be invested in this, but it is quite feasible, and potential data problems should not be used as an excuse for continued economic policy conditionality.
Specific recommendations
World Bank
The World Bank should:
• Stop attaching any economic policy conditions (prior actions and benchmarks) to its aid
• Move to outcome-based conditionality, linking aid to a few mutually agreed poverty reduction targets, based on the Millennium Development Goals or national poverty reduction targets
• Ensure that all country analytical work is driven by recipient governments’ agendas, is made public, and examines a wide range of policy options, assessing each in the light of its poverty impact.
The World Bank should:
• Stop attaching any economic policy conditions (prior actions and benchmarks) to its aid
• Move to outcome-based conditionality, linking aid to a few mutually agreed poverty reduction targets, based on the Millennium Development Goals or national poverty reduction targets
• Ensure that all country analytical work is driven by recipient governments’ agendas, is made public, and examines a wide range of policy options, assessing each in the light of its poverty impact.
IMF
The IMF should:
• In countries where macro-economic stability is still an issue, limitits quantitative targets (e.g. fiscal deficit, sector wage bill and inflation targets) to a minimum and ensure they are backed up
by independent analysis and broad agreement that this is the best option for poverty reduction. Analysis should be based around different economic scenarios and should be vocal about the need for increased aid volume and predictability.
The IMF should:
• In countries where macro-economic stability is still an issue, limitits quantitative targets (e.g. fiscal deficit, sector wage bill and inflation targets) to a minimum and ensure they are backed up
by independent analysis and broad agreement that this is the best option for poverty reduction. Analysis should be based around different economic scenarios and should be vocal about the need for increased aid volume and predictability.
Donors
Donors should:
• Invest at least 50 per cent of their aid in long-term (five years and more) predictable budget and sector support
• Move to using outcome-based conditionality, linking aid to a few mutually agreed Millennium Development Goals or national poverty reduction targets
• Ensure that aid and debt cancellation are formally de-linked from IMF and World Bank programmes and rather based on the implementation of mutually agreed poverty reduction goals coordinated across the major donors
• Assist Southern governments in developing their own capacity to analyse policy-reform options.
Donors should:
• Invest at least 50 per cent of their aid in long-term (five years and more) predictable budget and sector support
• Move to using outcome-based conditionality, linking aid to a few mutually agreed Millennium Development Goals or national poverty reduction targets
• Ensure that aid and debt cancellation are formally de-linked from IMF and World Bank programmes and rather based on the implementation of mutually agreed poverty reduction goals coordinated across the major donors
• Assist Southern governments in developing their own capacity to analyse policy-reform options.
Developing-country governments
Developing-country governments should:
• Ensure transparent and accountable budget and expenditure processes and involve parliaments and civil society in all national decision-making and setting of poverty reduction goals
• Increase capacity to collect poverty data and analyse the impact of different policy options on poor people.
Notes
1 Government of Ghana (2005) ‘Ghana: Poverty Reduction Strategy Paper
Annual Progress Report 2005’.
2 OECD Development Cooperation Directorate (2005) ‘Scaling up for
Results: Issues Paper’.
3 United Nations (2002) ‘Final Outcome of the International Conference on
Financing for Development’.
4 Commission for Africa (2005) ‘Our Common Interest’, report of the
Commission for Africa.
5 SPA-6 Budget Support Working Group (2004) ‘Survey of the Alignment of
Budget Support and Balance of Payments Support with National PRS
Processes’, report by the BSWG co-chairs, 9 January.
6 A. Wood (2006) ‘Tightening the leash or loosening the strings? The status
of HIPC conditionality in 2006’, for the Jubilee Debt Campaign.
7 See for example UNCTAD (2002) ‘Least Developed Countries Report,
Escaping the Poverty Trap’; International Network/World Bank (2002)
‘Structural Adjustment Participatory Review’.
8 Commission for Africa (2005) op.cit.
9 G8 Summit Documents (2005) ‘The Gleneagles Communique’.
10 S. Maxwell (2006) ‘Where Europe stands in the new aid architecture and
why we need a new $5bn European MDG Fund’, article for OneWorld.Net,
Finland.
11 The World Bank joined the IMF for the first time in providing balance of
payment support to governments, as opposed to project finance in 1980.
This was largely driven by capital account crises facing many low-income
countries as a result of the second oil shock in 1979.
12 W. Easterly (2002) ‘What did structural adjustment adjust? The
association of policies and growth with repeated IMF and World Bank
adjustment loans’, Centre for Global Development, Institute for Global
Economics.
13 World Bank (2001) ‘Adjustment Lending Retrospective, Final Report,
Operations Policy And Country’.
14 K. Kochar and S. Coorey (1999) ‘Economic growth: what has been
achieved and how’, in H. Bredenkamp and S. Schadler (eds.), Economic
Adjustment and Reform in Low-income Countries, studies by the staff of the
International Monetary Fund.
15 UNCTAD (2002), op.cit.
16 Structural Adjustment Participatory Review International Network/World
Bank (2002) ‘The Policy Roots Of Economic Crisis And Poverty: A Multi-
Country Participatory Assessment of Structural Adjustment Based on
Kicking the Habit:, Oxfam Briefing Paper, November 2006 30
Results of the Joint World Bank/Civil Society/Government Structural
Adjustment Participatory Review Initiative (SAPRI) and the Citizens’
Assessment of Structural Adjustment (CASA)’.
17 Ibid.
18 IMF (2005) ‘Evaluation of Structural Conditionality in IMF-Supported
Programs’.
19 World Bank (2004) ‘Development Policy Lending’, OP 8.60.
20 World Bank (2005) ‘Economic Growth in the 1990s: Learning from a
Decade of Reform’.
21 World Bank (2006) ‘Good Practice Principles for the Application of
Conditionality: A Progress Report’ OPCS November 2006.
22 World Bank (2006)
23 Wood (2005) World Bank’s Poverty Reduction Support Credit Continuity
or Change? Debt and Development Coalition Ireland.
24 World Bank (2005)
25 World Bank (2006)
26 Eurodad (2006) ‘A Development Injustice: World Bank and IMF
Conditionality’.
27 World Bank (2006)
28 Norwegian Ministry of Foreign Affairs (2006) ‘The World Bank’s and the
IMF’s use of Conditionality to Encourage Privatisation and Liberalisation:
Current Issues and Practices’, November 2006.
29 IMF, World Bank (2001) ‘Strengthening IMF-World Bank Collaboration on
Country Programs and Conditionality’, prepared by PDR (IMF) and OPCS
and PREM (World Bank), 23 August.
30 World Bank (2005), op.cit.
31 World Bank (2005), op.cit.
32 IMF, Independent Evaluation Office (2004) ‘Report on the Evaluation of
Poverty Reduction Strategy Papers (PRSPs) and the Poverty Reduction
Growth Facility (PRGF)’; World Bank OED (2004) ‘The Poverty Reduction
Strategy Initiative: An Independent Evaluation of the World Bank’s Support
Through 2003’
33 IMF Independent Evaluation Office (2004), ibid.
34 World Bank (2006) ‘Development Policy Retrospective’, Operations and
Country Services, 7 July.
35 Norwegian Ministry of Foreign Affairs (2006) ‘The World Bank’s and the
IMF’s use of Conditionality to Encourage Privatisation and Liberalisation:
Current Issues and Practices’, November 2006.
36 L. Hayes (2005) ‘Open on Impact? Slow Progress in World Bank and IMF
Poverty Analysis’, Eurodad, Christian Aid, Save the Children Fund UK and
Trócaire.
Kicking the Habit:, Oxfam Briefing Paper, November 2006 31
37 UNDP (2005) World Human Development Report.
38 UNDP (2005), ibid.
39 World Bank (2006) ‘Mali at a Glance’.
40 World Bank, IMF (2006) ‘Comparaison des resultants du suivi-evaluation
des depenses en faveur des PPTE en 2001 et 2004’.
41 Ibid
42 The Bretton Woods institutions and other main donors provide debt relief
to low-income countries through the Debt Relief Initiative for Heavily
Indebted Poor Countries (the HIPC Initiative), created in 1996. In order for a
country to be eligible to receive debt relief under this initiative, they have to
meet certain conditions. Once they have fulfilled these initial conditions, they
reach decision-point and are entitled to some debt relief. However, in order
to receive full debt relief and reach completion point, a country must also
meet another set of conditions. Once completion point is reached, debt relief
becomes irrevocable and is granted in full. To date, 40 countries are eligible
for HIPC debt relief and 20 have reached the completion point.
43 P. Guillaumont et al (2001) ‘Mali’, in Aid and Reform in Africa: Lessons
from Ten Case Studies, pp. 227–86, World Bank.
44 IMF and IDA (1998) ‘Final Decision Point Document on the Initiative for
Heavily Indebted Poor Countries (HIPC)’.
45 Cheick Ahmed Sanogo (2005/2006) ‘Énergie et écodéveloppement en
Mali’, Helio International, Observatoire de la viabilité énergétique.
46 OCDE (2005) ‘Perspectives économiques en Afrique 2004/2005, Mali’.
47 UNDP (2004) ‘Etat de la Governance au Mali, Rapport Final’, February
2004.
48 CAD MALI (2006) ‘Etude d'Impact sur l'Acces a l'Eauet a l'Electricite en
milieu Urbain (Bamako) suite a la Privatisation de l'Eau et de l'Electricite’.
49 CREE (2004) ‘Rapport d’activité de la CREE pour l’année 2004’.
50 Including mismanagement of funds within one of the cotton companies,
Compagnie Malienne pour le Développement des Textiles (CMDT), and
natural disasters.
51 Since 2003, as part of a group of cotton-producing countries in West
Africa (C-4), the Malian government, along with the governments of Benin,
Burkina Faso, and Chad, have been battling at the World Trade
Organization to end trade-distorting cotton subsidies paid to industrialised
countries.
52 World Bank (2003) Mali Country Assistance Strategy
53 World Bank (2005) ‘International Development Association Program
Document for a Proposed Economic Policy and Public Finance Management
Credit’.
54 World Bank (2003), ibid.
Kicking the Habit:, Oxfam Briefing Paper, November 2006 32
55 World Bank (2001) ‘Report and Recommendations of the President of the
International Development Association to the Executive Directors on
Proposed Third Structural Adjustment Credit (SAC III)’. The credit was split
into three tranches. The binding, prior actions, for release of the first tranche
of the credit, which happened in January 2002 called for, amongst other
conditions, the implementation of an updated cotton sector recovery and
reform programme and action plan. The prior actions for release of the
second tranche (which happened in December 2002) called, amongst other
conditions, to bring to the point of sale 84 per cent of HUICOMA (the cotton
seed oil factory) and bring to the point of sale the ginning mills and all other
assets belonging to the CMDT in the OHVN zone. Finally, the prior actions
for release of the third tranche (which happened in August 2003) called for
the sale of 84 per cent of HUICOMA and the sale of ginning mills in the
OHVN zone, at least.
56 IMF (2002) ‘Mali’s Fourth Review under the Poverty Reduction and
Growth Facility Arrangement’. The paper clearly notes that as a prior action
for continued IMF funding in 2002, the Malian government must establish a
negotiated base price for the purchase of seed cotton that reflects
movements in world market price.
57 World Bank (2005) ‘International Development Association Program
Document for a Proposed Fourth Structural Adjustment Credit (SAC IV)’.
58 Amadou Toumani Touré, President of the Republic of Mali, opening
remarks the Fourth Development Cooperation Forum, Washington Carter
Centre Discussion 2005.
59 World Bank, IMF (1998) ‘Final Decision Point Document on the Initiative
for Heavily Indebted Poor Countries (HIPC)’.
60 Government of Mali (2002) ‘One People - One Aim - One Faith’.
61 See endnotes 55 and 56 for proof of 2001 World Bank and IMF conditions
pushing privatisation and liberalisation. The World Bank’s ‘International
Development Association Program Document for a Proposed Fourth
Structural Adjustment Credit (SAC IV) (2005)’ does not stipulate as a prior
action a new pricing mechanism, just noting as a structural benchmark that a
protocol agreement between State/CMDT/Producers on the cotton purchase
price mechanism has been signed. However, for a trigger for the future SAC
V loan, implementation of the new pricing mechanisms for the 2005–06
campaign according to the Protocol is a prior action; the IMF’s ‘First Review
Under the Three Year Poverty Reduction and Growth Facility Arrangement’
(April 2006) clearly notes that as a prior action of the first review, the Malian
government must adopt a producer price mechanism for the cotton sector
that minimises budgetary risks by periodically channelling market price
signals to the producers and CMDT.
62 World Bank (2005) ‘International Development Association Program
Document for a proposed fourth structural adjustment credit (SAC IV)’.
63 World Bank (2005) ‘International Development Association Program
Document for a Proposed Economic Policy and Public Finance Management
Credit (EPPFMC)’.
Kicking the Habit:, Oxfam Briefing Paper, November 2006 33
64 The World Bank’s current loan document, the ‘International Development
Association Program Document for a Proposed Economic Policy and Public
Finance Management Credit (EPPFMC)’ (2005), clearly has as a prior action
implementation of the pricing agreement. It also has this as a prior action or
trigger for future lending, post the EPPFMC. Privatisation of the CMDT is a
structural benchmark of the EPPFMC, but a prior action of a future loan post
EPPFMC. The IMF’s current loan, the ‘Fourth Review Under the Three Year
Arrangement Under the Poverty Reduction and Growth Facility’ (2006)
clearly has as a structural benchmark the approval by the Malian Council of
Ministers of an operational plan for privatisation of the CMDT to be
implemented in September 2006 and the employment of an advisor for the
sale in March 2007. It no longers has as a condition (prior action or
benchmark) liberalisation of the price.
65 The director of the CEPIA is Ousmane Sy, Former Minister of
Administration Territoriale et des Collectivités Locales under Alpha Oumar
Konaré’s presidency.
66 World Bank (2005) ‘International Development Association Program
Document for a Proposed Fourth Structural Adjustment Credit’ (SAC IV)’
67 World Bank (2005) Ibid.
68 World Bank(2005) Ibid.
69 World Bank (2003) ‘Mali Structural Adjustment Credit III’
70 Interview with UNDP’s senior economist in Mali, September 2006.
71 Wodon et al (2006) ‘Cotton and Poverty in Mali’, World Bank Draft Report.
72 Traore, A (2006) ‘Effets preliminaires de la baisse du prix du coton sur le
revenu et les conditions de vie des exploitations cotonnieres au Mali’, Study
commissioned by Oxfam America, October 2006, cited in Oxfam
Interantional (2006) ‘Pricing Farmers out of Cotton’
73 Ibid
74 Keita, Manda Sadio and Nubupko, K (2005) ‘L’imact du nouveau
mechanisms de determination du prix de coton grain sur l’economie
Malienne’, CIRAD/OXFAM, October cited in forthcoming Oxfam International
(2006) ‘Pricing Farmers out of cotton’.
75 There is no doubt that Mali’s cotton sector could be more efficient.
Analysis within the World Bank’s Proposed Economic Policy and Public
Finance Maangement Credit (2005) shows that the production costs of the
CMDT are far higher than in its neighbouring country, Burkina Faso.
However, the question is whether private ownership is the only solution to
enhancing efficiency (as the World Bank and IMF assume). Burkina Faso’s
cotton industry, for example, is not fully privately owned and has managed to
increase efficiency partly as a result of allowing farmers to own part of the
cotton company.
76 Based on an interview with Franco Tranquilli in October 2006.
77 European Commission (2002) ‘Conditionality revisited – a new approach
to support for economic reforms in Burkina Faso’.
Kicking the Habit:, Oxfam Briefing Paper, November 2006 34
© Oxfam International November 2006
This paper was written by Hetty Kovach and Sébastien Fourmy. Oxfam
acknowledges the assistance of Max Lawson, Elizabeth Stuart, Sally Baden and
Michel Anglade in its production. It is part of a series of papers written to inform
public debate on development and humanitarian policy issues.
The text may be used free of charge for the purposes of advocacy, campaigning,
education, and research, provided that the source is acknowledged in full. The
copyright holder requests that all such use be registered with them for impact
assessment purposes. For copying in any other circumstances, or for re-use in
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a fee may be charged. E-mail publish@oxfam.org.uk.
For further information on the issues raised in this paper please e-mail
advocacy@oxfaminternational.org.
Kicking the Habit:, Oxfam Briefing Paper, November 2006 35
www.oxfam.org
Developing-country governments should:
• Ensure transparent and accountable budget and expenditure processes and involve parliaments and civil society in all national decision-making and setting of poverty reduction goals
• Increase capacity to collect poverty data and analyse the impact of different policy options on poor people.
Notes
1 Government of Ghana (2005) ‘Ghana: Poverty Reduction Strategy Paper
Annual Progress Report 2005’.
2 OECD Development Cooperation Directorate (2005) ‘Scaling up for
Results: Issues Paper’.
3 United Nations (2002) ‘Final Outcome of the International Conference on
Financing for Development’.
4 Commission for Africa (2005) ‘Our Common Interest’, report of the
Commission for Africa.
5 SPA-6 Budget Support Working Group (2004) ‘Survey of the Alignment of
Budget Support and Balance of Payments Support with National PRS
Processes’, report by the BSWG co-chairs, 9 January.
6 A. Wood (2006) ‘Tightening the leash or loosening the strings? The status
of HIPC conditionality in 2006’, for the Jubilee Debt Campaign.
7 See for example UNCTAD (2002) ‘Least Developed Countries Report,
Escaping the Poverty Trap’; International Network/World Bank (2002)
‘Structural Adjustment Participatory Review’.
8 Commission for Africa (2005) op.cit.
9 G8 Summit Documents (2005) ‘The Gleneagles Communique’.
10 S. Maxwell (2006) ‘Where Europe stands in the new aid architecture and
why we need a new $5bn European MDG Fund’, article for OneWorld.Net,
Finland.
11 The World Bank joined the IMF for the first time in providing balance of
payment support to governments, as opposed to project finance in 1980.
This was largely driven by capital account crises facing many low-income
countries as a result of the second oil shock in 1979.
12 W. Easterly (2002) ‘What did structural adjustment adjust? The
association of policies and growth with repeated IMF and World Bank
adjustment loans’, Centre for Global Development, Institute for Global
Economics.
13 World Bank (2001) ‘Adjustment Lending Retrospective, Final Report,
Operations Policy And Country’.
14 K. Kochar and S. Coorey (1999) ‘Economic growth: what has been
achieved and how’, in H. Bredenkamp and S. Schadler (eds.), Economic
Adjustment and Reform in Low-income Countries, studies by the staff of the
International Monetary Fund.
15 UNCTAD (2002), op.cit.
16 Structural Adjustment Participatory Review International Network/World
Bank (2002) ‘The Policy Roots Of Economic Crisis And Poverty: A Multi-
Country Participatory Assessment of Structural Adjustment Based on
Kicking the Habit:, Oxfam Briefing Paper, November 2006 30
Results of the Joint World Bank/Civil Society/Government Structural
Adjustment Participatory Review Initiative (SAPRI) and the Citizens’
Assessment of Structural Adjustment (CASA)’.
17 Ibid.
18 IMF (2005) ‘Evaluation of Structural Conditionality in IMF-Supported
Programs’.
19 World Bank (2004) ‘Development Policy Lending’, OP 8.60.
20 World Bank (2005) ‘Economic Growth in the 1990s: Learning from a
Decade of Reform’.
21 World Bank (2006) ‘Good Practice Principles for the Application of
Conditionality: A Progress Report’ OPCS November 2006.
22 World Bank (2006)
23 Wood (2005) World Bank’s Poverty Reduction Support Credit Continuity
or Change? Debt and Development Coalition Ireland.
24 World Bank (2005)
25 World Bank (2006)
26 Eurodad (2006) ‘A Development Injustice: World Bank and IMF
Conditionality’.
27 World Bank (2006)
28 Norwegian Ministry of Foreign Affairs (2006) ‘The World Bank’s and the
IMF’s use of Conditionality to Encourage Privatisation and Liberalisation:
Current Issues and Practices’, November 2006.
29 IMF, World Bank (2001) ‘Strengthening IMF-World Bank Collaboration on
Country Programs and Conditionality’, prepared by PDR (IMF) and OPCS
and PREM (World Bank), 23 August.
30 World Bank (2005), op.cit.
31 World Bank (2005), op.cit.
32 IMF, Independent Evaluation Office (2004) ‘Report on the Evaluation of
Poverty Reduction Strategy Papers (PRSPs) and the Poverty Reduction
Growth Facility (PRGF)’; World Bank OED (2004) ‘The Poverty Reduction
Strategy Initiative: An Independent Evaluation of the World Bank’s Support
Through 2003’
33 IMF Independent Evaluation Office (2004), ibid.
34 World Bank (2006) ‘Development Policy Retrospective’, Operations and
Country Services, 7 July.
35 Norwegian Ministry of Foreign Affairs (2006) ‘The World Bank’s and the
IMF’s use of Conditionality to Encourage Privatisation and Liberalisation:
Current Issues and Practices’, November 2006.
36 L. Hayes (2005) ‘Open on Impact? Slow Progress in World Bank and IMF
Poverty Analysis’, Eurodad, Christian Aid, Save the Children Fund UK and
Trócaire.
Kicking the Habit:, Oxfam Briefing Paper, November 2006 31
37 UNDP (2005) World Human Development Report.
38 UNDP (2005), ibid.
39 World Bank (2006) ‘Mali at a Glance’.
40 World Bank, IMF (2006) ‘Comparaison des resultants du suivi-evaluation
des depenses en faveur des PPTE en 2001 et 2004’.
41 Ibid
42 The Bretton Woods institutions and other main donors provide debt relief
to low-income countries through the Debt Relief Initiative for Heavily
Indebted Poor Countries (the HIPC Initiative), created in 1996. In order for a
country to be eligible to receive debt relief under this initiative, they have to
meet certain conditions. Once they have fulfilled these initial conditions, they
reach decision-point and are entitled to some debt relief. However, in order
to receive full debt relief and reach completion point, a country must also
meet another set of conditions. Once completion point is reached, debt relief
becomes irrevocable and is granted in full. To date, 40 countries are eligible
for HIPC debt relief and 20 have reached the completion point.
43 P. Guillaumont et al (2001) ‘Mali’, in Aid and Reform in Africa: Lessons
from Ten Case Studies, pp. 227–86, World Bank.
44 IMF and IDA (1998) ‘Final Decision Point Document on the Initiative for
Heavily Indebted Poor Countries (HIPC)’.
45 Cheick Ahmed Sanogo (2005/2006) ‘Énergie et écodéveloppement en
Mali’, Helio International, Observatoire de la viabilité énergétique.
46 OCDE (2005) ‘Perspectives économiques en Afrique 2004/2005, Mali’.
47 UNDP (2004) ‘Etat de la Governance au Mali, Rapport Final’, February
2004.
48 CAD MALI (2006) ‘Etude d'Impact sur l'Acces a l'Eauet a l'Electricite en
milieu Urbain (Bamako) suite a la Privatisation de l'Eau et de l'Electricite’.
49 CREE (2004) ‘Rapport d’activité de la CREE pour l’année 2004’.
50 Including mismanagement of funds within one of the cotton companies,
Compagnie Malienne pour le Développement des Textiles (CMDT), and
natural disasters.
51 Since 2003, as part of a group of cotton-producing countries in West
Africa (C-4), the Malian government, along with the governments of Benin,
Burkina Faso, and Chad, have been battling at the World Trade
Organization to end trade-distorting cotton subsidies paid to industrialised
countries.
52 World Bank (2003) Mali Country Assistance Strategy
53 World Bank (2005) ‘International Development Association Program
Document for a Proposed Economic Policy and Public Finance Management
Credit’.
54 World Bank (2003), ibid.
Kicking the Habit:, Oxfam Briefing Paper, November 2006 32
55 World Bank (2001) ‘Report and Recommendations of the President of the
International Development Association to the Executive Directors on
Proposed Third Structural Adjustment Credit (SAC III)’. The credit was split
into three tranches. The binding, prior actions, for release of the first tranche
of the credit, which happened in January 2002 called for, amongst other
conditions, the implementation of an updated cotton sector recovery and
reform programme and action plan. The prior actions for release of the
second tranche (which happened in December 2002) called, amongst other
conditions, to bring to the point of sale 84 per cent of HUICOMA (the cotton
seed oil factory) and bring to the point of sale the ginning mills and all other
assets belonging to the CMDT in the OHVN zone. Finally, the prior actions
for release of the third tranche (which happened in August 2003) called for
the sale of 84 per cent of HUICOMA and the sale of ginning mills in the
OHVN zone, at least.
56 IMF (2002) ‘Mali’s Fourth Review under the Poverty Reduction and
Growth Facility Arrangement’. The paper clearly notes that as a prior action
for continued IMF funding in 2002, the Malian government must establish a
negotiated base price for the purchase of seed cotton that reflects
movements in world market price.
57 World Bank (2005) ‘International Development Association Program
Document for a Proposed Fourth Structural Adjustment Credit (SAC IV)’.
58 Amadou Toumani Touré, President of the Republic of Mali, opening
remarks the Fourth Development Cooperation Forum, Washington Carter
Centre Discussion 2005.
59 World Bank, IMF (1998) ‘Final Decision Point Document on the Initiative
for Heavily Indebted Poor Countries (HIPC)’.
60 Government of Mali (2002) ‘One People - One Aim - One Faith’.
61 See endnotes 55 and 56 for proof of 2001 World Bank and IMF conditions
pushing privatisation and liberalisation. The World Bank’s ‘International
Development Association Program Document for a Proposed Fourth
Structural Adjustment Credit (SAC IV) (2005)’ does not stipulate as a prior
action a new pricing mechanism, just noting as a structural benchmark that a
protocol agreement between State/CMDT/Producers on the cotton purchase
price mechanism has been signed. However, for a trigger for the future SAC
V loan, implementation of the new pricing mechanisms for the 2005–06
campaign according to the Protocol is a prior action; the IMF’s ‘First Review
Under the Three Year Poverty Reduction and Growth Facility Arrangement’
(April 2006) clearly notes that as a prior action of the first review, the Malian
government must adopt a producer price mechanism for the cotton sector
that minimises budgetary risks by periodically channelling market price
signals to the producers and CMDT.
62 World Bank (2005) ‘International Development Association Program
Document for a proposed fourth structural adjustment credit (SAC IV)’.
63 World Bank (2005) ‘International Development Association Program
Document for a Proposed Economic Policy and Public Finance Management
Credit (EPPFMC)’.
Kicking the Habit:, Oxfam Briefing Paper, November 2006 33
64 The World Bank’s current loan document, the ‘International Development
Association Program Document for a Proposed Economic Policy and Public
Finance Management Credit (EPPFMC)’ (2005), clearly has as a prior action
implementation of the pricing agreement. It also has this as a prior action or
trigger for future lending, post the EPPFMC. Privatisation of the CMDT is a
structural benchmark of the EPPFMC, but a prior action of a future loan post
EPPFMC. The IMF’s current loan, the ‘Fourth Review Under the Three Year
Arrangement Under the Poverty Reduction and Growth Facility’ (2006)
clearly has as a structural benchmark the approval by the Malian Council of
Ministers of an operational plan for privatisation of the CMDT to be
implemented in September 2006 and the employment of an advisor for the
sale in March 2007. It no longers has as a condition (prior action or
benchmark) liberalisation of the price.
65 The director of the CEPIA is Ousmane Sy, Former Minister of
Administration Territoriale et des Collectivités Locales under Alpha Oumar
Konaré’s presidency.
66 World Bank (2005) ‘International Development Association Program
Document for a Proposed Fourth Structural Adjustment Credit’ (SAC IV)’
67 World Bank (2005) Ibid.
68 World Bank(2005) Ibid.
69 World Bank (2003) ‘Mali Structural Adjustment Credit III’
70 Interview with UNDP’s senior economist in Mali, September 2006.
71 Wodon et al (2006) ‘Cotton and Poverty in Mali’, World Bank Draft Report.
72 Traore, A (2006) ‘Effets preliminaires de la baisse du prix du coton sur le
revenu et les conditions de vie des exploitations cotonnieres au Mali’, Study
commissioned by Oxfam America, October 2006, cited in Oxfam
Interantional (2006) ‘Pricing Farmers out of Cotton’
73 Ibid
74 Keita, Manda Sadio and Nubupko, K (2005) ‘L’imact du nouveau
mechanisms de determination du prix de coton grain sur l’economie
Malienne’, CIRAD/OXFAM, October cited in forthcoming Oxfam International
(2006) ‘Pricing Farmers out of cotton’.
75 There is no doubt that Mali’s cotton sector could be more efficient.
Analysis within the World Bank’s Proposed Economic Policy and Public
Finance Maangement Credit (2005) shows that the production costs of the
CMDT are far higher than in its neighbouring country, Burkina Faso.
However, the question is whether private ownership is the only solution to
enhancing efficiency (as the World Bank and IMF assume). Burkina Faso’s
cotton industry, for example, is not fully privately owned and has managed to
increase efficiency partly as a result of allowing farmers to own part of the
cotton company.
76 Based on an interview with Franco Tranquilli in October 2006.
77 European Commission (2002) ‘Conditionality revisited – a new approach
to support for economic reforms in Burkina Faso’.
Kicking the Habit:, Oxfam Briefing Paper, November 2006 34
© Oxfam International November 2006
This paper was written by Hetty Kovach and Sébastien Fourmy. Oxfam
acknowledges the assistance of Max Lawson, Elizabeth Stuart, Sally Baden and
Michel Anglade in its production. It is part of a series of papers written to inform
public debate on development and humanitarian policy issues.
The text may be used free of charge for the purposes of advocacy, campaigning,
education, and research, provided that the source is acknowledged in full. The
copyright holder requests that all such use be registered with them for impact
assessment purposes. For copying in any other circumstances, or for re-use in
other publications, or for translation or adaptation, permission must be secured and
a fee may be charged. E-mail publish@oxfam.org.uk.
For further information on the issues raised in this paper please e-mail
advocacy@oxfaminternational.org.
Kicking the Habit:, Oxfam Briefing Paper, November 2006 35
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