World Bank and IMF conditionality: a development injustice

World Bank and IMF conditionality: a development injustice

World Bank and IMF privatisation and trade liberalisation conditions on loans to developing countries

This report examines the conditions that the World Bank and International Monetary Fund (IMF) attach to their development lending in some of the world’s poorest countries. It is based on a desk-based study carried out by Eurodad which examined the content of World Bank and IMF development finance contracts for a selection of twenty poor countries across the world between 2002 and early 2006.

The report reveals that impoverished countries still face an unacceptably high and rising number of conditions in order to gain access to World Bank and IMF development finance. On average poor countries face as many as 67 conditions per World Bank loan with some facing close to 200 conditions. In addition to imposing a massive administrative burden on already over-stretched developing governments, the proliferation of IMF and World Bank conditions often push highly controversial economic policy reforms on poor countries, like trade liberalisation and privatisation of essential services.

The study found that:

  • Eighteen out of the 20 poor countries assessed had privatisation-related conditions attached to their development finance from the World Bank or IMF. And the number of aggregate privatisation-related conditions that the World Bank and IMF impose on developing countries has risen between 2002 and 2006. For many countries privatisation-related conditions make up a substantial part of their overall conditions from the World Bank and IMF
  • the IMF and World Bank often impose the same privatisation conditions on a country. One quarter (5 out of 20) of the countries assessed had the same privatisation condition contained within Bank and Fund current loan documents. Such cross conditionality places a massive pressure on developing countries to comply with the policy reform condition, as the country risks losing multiple sources of finance. This also reveals a worrying lack of division of roles and responsibilities between the two institutions

The study concludes that recent attempts by both the institutions to streamline development finance conditionality have failed. It finds that institutional guidelines to reduce the number and scope of conditions imposed are not being implemented properly, and are not sufficient to protect developing countries from the negative impact of onerous conditionality.

The report recommends that the institutions should ensure that any conditions focus only on fundamental fiduciary concerns which enhance developing countries citizens’ ability to hold their governments to account, rather than developing countries’ accountability to the Bank and Fund. [Adapted from author]