星期四, 十二月 14, 2006

Kicking the Habit (1) World Bank and the IMF: Conditions to aid.

Oxfam Briefing Paper 96. Nov 18/ 2006
http://www.oxfam.org/
Kicking the Habit: How the World Bank and theIMF are still addicted to attaching economic policy conditions to aid.
Despite numerous commitments to reform, The World Bank and the International Monetary Fund (IMF) are still using their aid to make developing countries implement inappropriate economic policies, with the tacit approval of rich-country governments. These economic policy conditions undermine national policymaking, delay aid flows, and often fail to deliver for poor people. If the world is to make poverty history, this practice must be stopped. Aid must be conditional on being spent transparently and on reducing poverty, and nothing more.

Summary
If the world is to make poverty history, governments in poor countries have to have anti-poverty plans. And these plans must be supported by aid from rich countries. Of course, this aid should come with some terms attached. Rich countries have the right to expect their aid to be clearly accounted for. They – and citizens of poor countries – are also entitled to expect this aid to be used to fight poverty. What rich countries are not entitled to do is use their aid to push economic policy reforms such as privatisation and liberalisation on poor countries. But this is exactly what the World Bank and the IMF continue to do, with the tacit support of their rich-country shareholders. Economic policy conditionality stops aid working. It undermines national decision-making, vital for successful development. It can lead to unpredictable ‘stop-start’ aid flows. And it can mean poor countries have to implement policies based on dogma and ideology rather than on evidence.
Over the last five years there has been a growing international consensus that economic policy conditionality does not work. ’Policy conditionality… is both an infringement on sovereignty and ineffective‘ noted the Africa Commission in 2005. The European Commission and the British and Norwegian governments have developed policies to end the tying of their aid to privatisation and liberalisation conditions. Even the World Bank and the IMF, historically the chief proponents of economic policy conditionality, agreed to use it far more sparingly and only when two important safeguards were met. Economic policy conditions had firstly to be ‘country-owned’, and secondly to be based on analysis of the impact of the policy on poor people prior to their application.
However, the evidence to date shows that the World Bank and the IMF have failed to kick the habit. A recent World Bank report assessing its own progress on reforming conditionality reveals that one in four of World Bank policy conditions in 2006 push economic reforms. A 2006 study by the Norwegian government of IMF conditionality revealed that 26 out of 40 poor countries still have privatisation and liberalisation conditions attached to their IMF loans. There have been some improvements in enhancing country ownership of reform with the advent of nationally-created poverty plans. But, when the World Bank surveyed poor-country government staff in 2005, 50 per cent still felt that ’the Bank introduced elements that were not part of the country program’. Finally, both institutions are not systematically assessing the impact of economic policy reforms on the poor.
This paper shows just how conditionality hurts. It looks at Mali, where far from leading to economic growth and poverty reduction, conditions have hiked electricity prices and are likely to hurt cotton farmers as well as delaying aid flows and undermining country ownership of policies. The World Bank and the IMF made their budget aid conditional on the privatisation of Malian electricity and on the liberalisation and privatisation of the Malian cotton sector. Cotton privatisation continues to be a condition of their lending today.
In 2005, President Amadou Toumani Touré of the Republic of Mali noted at an opening speech of a Development Cooperation Forum in Washington: ‘True partnership supposes autonomy of beneficiary countries in requesting aid and in determining its objectives… Often programmes are imposed on us, and we are told it is our programme… People who have never seen cotton come to give us lessons on cotton… No one can respect the conditionalities of certain donors. They are so complicated that they themselves have difficulty getting us to understand them. This is not a partnership. This is a master relating to his student.’



Mali is extremely poor and chronically under-aided. 90 per cent of Mali’s population lives on less than two dollars a day (this country has the highest percentage of such people in the world), yet it receives less than half the amount of aid per person than its neighbour, Senegal, which is less poor. Despite this, the World Bank has deliberately prevented the Malian government from accessing more aid on the grounds of its failure to privatise its cotton industry. Mali currently receives at least $72m less than it could. This money could be used to pay the salaries of 5,000 teachers for the next ten years, in a country where only 17 per cent of women between 15 and 24 are literate.


Such conditions have at best failed to deliver for the poor and at worst have destroyed poor peoples’ livelihoods. Private ownership of the Malian electricity company has only provided a minimal expansion in coverage and instead has resulted in dramatic price increases. Liberalisation of the cotton sector has exposed Malian cotton farmers to the heavily distorted world cotton market price. Prices have been in severe decline as a result of huge rich-country subsidies to their own farmers. The result: three million Malian farmers saw a 20 per cent drop in the price they received for their cotton in 2005. According to an unpublished study by the World Bank, seen by Oxfam, this is likely to increase poverty by 4.6 per cent across the country.
Donors should stop attaching detailed economic policy conditions to their aid. They are entitled to require financial accountability and progress towards mutually agreed broad poverty reduction goals or outcomes as conditions of their aid, but nothing more. Moving to linking aid to broad poverty reduction goals or as it is more commonly referred to, ‘outcomebased conditionality’, would stop donors from pushing specific policies and unnecessarily involving themselves in the internal affairs of developing countries. In addition, government progress would be assessed according to results on the ground and there would be ongoing opportunities to change policies according to what has worked. Finally, ensuring that outcome-based conditions are transparently produced and reviewed means that parliamentarians and citizen in recipient countries can better hold their own governments to account.

Why Conditionality Matters. More and better aid is needed.
If the world is to make poverty history, governments in poor countries need to have comprehensive plans to tackle poverty, drawn up in consultation with their citizens. These plans should include clear goals such as getting every child into school, or eliminating fees for basic healthcare. The main source of finance for these plans should be poor-country governments themselves. In Ghana, for example, 85 per cent of spending on health is financed by domestic resources.1 However, the poorest countries on earth are not able to implement their antipoverty plans by themselves. They need support from rich countries, in the form of long-term commitments of financial aid and cancellation of debts.
Given this need, and under pressure from campaigners worldwide, commitments were made by rich-country leaders in 2005 to significantly increase both the quality and quantity of foreign aid. The European Union took the lead, agreeing to increase its aid by $38bn annually by 2010 and to improve its quality significantly.2 Although these commitments fall short of what is needed to get the 100 million children currently out of education into school, for instance, or to pay for the 3.8 million extra health workers needed, if they are acted upon they could make a massive difference to millions of lives.

Specific economic policy conditions undermine development
But if this aid and debt relief comes with large numbers of inappropriate strings attached, or what are known as conditions, its utility can be seriously undermined. Aid should of course come with some terms attached. Donor countries, which after all are spending the taxes of their own citizens, have a right to expect their money to be spent in a transparent way and to be clearly accounted for. They – and poor people around the world – are also entitled to expect the aid to be used to contribute to goals to eliminate the unacceptable suffering which exists in so many countries. What donor countries are not entitled to do is to use their aid or debt relief to dictate poor countries’ economic policies.
There are three reasons for this. Firstly, it is clear that countries will only develop if their governments take full responsibility for devising their own plans, with commitment from their political leaders and under the scrutiny of their citizens. As the United Nations Conference on Financing for Development recognised, ’Each country has primary responsibility for its own economic and social development, and the role of national policies and development strategies cannot be overemphasised’.3 In the jargon of development this is called country ownership; policies must be fully owned by poor-country governments themselves. If the policies are foisted on them as the price of accessing aid, this vital ownership will be undermined. The Africa Commission in 2005 concluded, ’History has shown us that development cannot and does not work if policies are shaped and forced by outsiders’.4

The second major problem with attaching economic policy conditions to aid is that it can lead to unpredictable aid flows that stop and start. This is because when a country fails to implement a condition, say for example to privatise an industry, donor countries often suspend or even cancel aid. To tackle poverty, countries need to make long-term plans, and to do this they need to have long-term predictable aid commitments. If aid is being used, for example, to give anti-retroviral treatment to those with HIV, this treatment has to be continuous, and cannot be suspended or delayed. The same is true for paying the salaries of health workers and teachers. Aid that is unpredictable or delayed because of the link to economic policy conditions cannot be used for these vital purposes.
In 2003 the Strategic Partnership for Africa (SPA), a donor forum for development agencies working in low-income countries in Africa, conducted a survey among donors and governments in 18 African states. The survey showed that 48 per cent of delayed or lost disbursements were due to unmet policy conditions.5 Another recent study of countries eligible for debt cancellation showed that failure to fulfil World Bank and IMF conditions was one of the major causes of delay in countries actually receiving their cancellation. Importantly, the research showed that the problem was not with poor countries failing to meet those conditions that called for an increase in social spending, but instead was due to a failure to implement economic policy conditions, such as privatisation.6
The third problem with attaching economic policy conditions to aid is that it means poor countries have to implement policies often based on dogma and ideology rather than on evidence of what will work in a particular country. Donors have a tendency to use a one-size-fits-all approach when it comes to economic reform in developing countries. Commonly known as the ‘Washington Consensus’, donors often prescribe cuts in public spending, affecting countries’ ability to hire nurses, for instance, while at the same time encouraging governments to liberalise trade and reducing the role of the state in economic affairs, primarily through privatisation of state-owned enterprises. These policies are the right ones in some cases. For a particular country it might be beneficial to liberalise trade in some of its sectors, allowing cheaper imports of vital agricultural inputs such as fertiliser, for instance. Similarly, at times the privatisation of non-essential services such as the insurance industry may be a good move. At other times the correct policy may be to protect markets or keep a company in public ownership. However, what is clear is that the necessary analysis of the specific country situation and the needs of poor people can only be undertaken at the national level, and not in Washington by the World Bank or the IMF. Making vital aid and debt relief conditional on a one-size-fits-all set of economic reforms has now been widely discredited as failing to lead to a reduction in poverty. Many studies have in fact shown that it has led to an increase in poverty levels.7
Given these three reasons, over the last five years there has been a growing international consensus that tying aid to economic policy conditions does not work. ’Policy conditionality…is both an infringement on sovereignty and ineffective’8 noted the Africa Commission in 2005. In the same year the leaders of the G8 announced: ’It is up to developing countries…to decide, plan and sequence their economic policies’.9 The European Commission and the British and Norwegian governments have all recognised the harmful impacts of economic policy conditionality and developed policies to end the tying of their aid to privatisation and trade-liberalisation conditions.

Conditionality Still A Problem
Despite this growing consensus, aid and debt relief is still tied to economic policy reforms. The main culprits are the World Bank and the IMF, who continue to use their aid to push inappropriate economic policies on developing countries. Their conditions have a significant impact, given the large volume of aid that the World Bank gives. Moreover, nearly all other rich-country donors (for example the French or British governments) use the presence of an IMF programme - and compliance to its conditions - as a signal to give their own bilateral aid to support poor-country budgets. They also often tie their aid to the framework of conditions developed by the World Bank.

World Bank and IMF: the Walmarts of the development sectorThe World Bank is the largest provider of long-term development finance for poor countries. Last year, its concessional lending arm, the International Development Association, provided $8.7bn in aid to developing countries. This is about one-tenth of all aid worldwide. World Bank aid is mostly made up of low-interest loans, but also of grant aid. In addition to being a large-volume aid donor, the World Bank dominates international development policy research and analysis. The Bank has been dubbed the ‘Walmart’ of the aid world, referring to the US supermarket giant, in recognition of its unrivalled influence over developing thinking.10

The IMF, on the other hand, is not a development institution by origin, mandated instead to provide economic surveillance and lending on a short-term basis only to countries facing a balance of payment crisis or exogenous shocks (i.e. shocks caused by external forces or factors). However, since 1980 the IMF has become a permanent fixture in many developing countries and has converged with the World Bank to push an integrated set of economic policies on poor countries. Part of the reason for the IMF’s continued presence in developing countries is that nearly all official development donors, bilateral as well as multilateral (including the World Bank), tie their aid and debt relief to the presence of an IMF lending programme.

This gatekeeper role means the economic policy conditions the IMF attaches to its lending are hugely potent. If a poor country does not fulfill IMF conditions it risks losing both IMF finance and all other sources of aid and debt relief tied to the IMF programme.

Looking Back In Anger: a history of World Bank and IMF conditionalityThe World Bank and the IMF have historically led the way in economic-policy conditionality, with the advent of ‘structural adjustment lending’ in the 1980s.11 This lending, which went straight to governments’ budgets, was meant not only to help poor countries with balance of payments difficulties, but also to lay the groundwork for sustained growth.12 To achieve this, the lending came attached to Washington Consensus economic reforms, which both institutions fervently believed to be the answer for economic growth in developing countries. In order to receive funding, countries had to implement these reforms. Intended as a short-term instrument, structural adjustment lending and its accompanying economic policy conditionality remained in place for over two decades and in the words of the Bank became ‘an important developmental instrument for supporting social, structural and sectoral reforms over the medium term’.13

But far from delivering growth in developing countries, structural adjustment with its specific economic reform agenda in many cases actually made poverty worse, increasing unemployment, reducing wages, and raising the costs of basic services. In its own evaluation of structural adjustment lending, the IMF admits that its impact on growth has been barely discernible.14 And an United Nations Conference on Trade and Development (UNCTAD) assessment of IMF and World Bank structural adjustment programmes revealed that the proportion of the population living below one dollar a day rose soon after the adoption of the programmes. This was the case even in countries recognised as best Washington Consensus Performers by the World Bank.15
Table 1: The economic and poverty impact of IMF Structural
Adjustment Programs (SAF/ESAF) before and after in LDCs
3 years
before
1st 3 years
after
2nd 3 years
after
GDP per capita
(%)
-1.4 0.5 -1.4
% of population
living on less that
$1 a day (1985
PPP)
51.3 52 53.3
% of the
population living
on less than $2 a
day (1985 PPP)
83.1 83.7 84.1
Source: UNCTAD (2002) ‘Least Developed Countries Report, Escaping the Poverty
Trap’.
Perhaps the loudest critics of structural adjustment lending came from civil society in the developing countries. The social costs of structural adjustment are well-documented in a civil-society assessment of structural adjustment in 2002, which noted that ‘Poverty and inequality are now far more intense and pervasive than they were 20 years ago, wealth is more highly concentrated, and opportunities are far fewer for the many who have been left behind by adjustment’.16

0 Comments:

发表评论

<< Home