World Bank and IMF use of privatisation and liberalisation policy conditionality and its effects on selected recipient countries

World Bank and IMF use of privatisation and liberalisation policy conditionality and its effects on selected recipient countries

WB and IMF privatisation and liberalisation policies and their impact on Malawi and Zambia

This report examines the World Bank (WB) and International Monetary Fund (IMF) use of privatisation and liberalisation policy conditionality and how these policy conditionalities effect selected recipient countries.  An analysis is given on the extent to which privatisation and liberalisation conditionality is ongoing in the WB and the IMF, followed by a summary of previous reports and findings on liberalisation and privatisation policy conditionality and finally an analysis of the consequences privatisation and liberalisation policy conditionality has had on the population in two recipient countries, namely Malawi and Zambia.

The author argues that the WB and IMF continues to attach economic policy conditionality, mainly privatisation and liberalisation policies to loans/grants, debt relief and debt cancellation programmes it extends to recipient countries, despite evidence that these policies have failed to promote sustainable development and end poverty and have largely impacted negatively on the lives of the poor in most recipient countries. The continued use of conditionality is problematic because it hinders recipient countries policy space to choose their own policy solutions. In addition, governments are placed under undue pressure to adopt policies they otherwise would not have adopted leading to lack of ownership of national policies and developing country governments lack accountability towards their own populations as they have to focus on answering to the International Financial Institutions (IFIs). The paper argues that privatisation or liberalisation in itself is not negative, but it should be left up to the borrowing countries to make their own policy choices. 

Recommendations are made to civil society organisations, recipient countries and International Financial Institutions and bilateral donors. These include:

To the International Financial Institutions and bilateral donors:

  • IFIs must untie policy advice from loans, aid and debt relief.  In particular,the World Bank and IMF should stop imposing harmful economic policy conditions like privatisation and trade liberalisation.
  • country ownership of IFIs programmes can only be realised when there is genuine participation by the government and people of recipient countries, and only if the content of conditionality i.e. the policies are appropriate and bring about positive results.
To recipient countries:
  • observe standards that assure transparency, accountability, and human rights
  • establish regional banking institutions, which understands the complexities of a region  better than the IMF and which would  not impose conditionalities.
To civil society organisations:
  • continue to strongly argue against conditions on loans and grants and hold donors responsible when human right are not respected in the donor funded project and programmes
  • challenge donor governments to withdraw their funding from World Bank and IMF where it will be used to push economic policy conditionality on recipient countries.