World Bank reduces loan conditions, UK frees funds
Source: Reuters
By Lesley Wroughton WASHINGTON, Dec 5 (Reuters) - World Bank shareholder governments on Tuesday endorsed a report by the development agency that showed it had reduced the number of conditions it attaches to loans to poor countries. The move follows pressure on the World Bank by big donor countries to whittle down the raft of conditions it imposes on borrower nations. For decades critics have accused the bank of reshaping the policies of developing countries by imposing "conditionality" to force economic and other changes. They argued that such conditions were counterproductive to the bank's mission of helping the poor and deprived governments of decision-making while placing it in the hands of World Bank officials. Large World Bank donors like Britain insisted that countries should be allowed to own their policies and chart their own economic courses without interference. Shortly after the report was endorsed, Britain's International Development Minister Hilary Benn announced he would release 50 million pounds ($98 million) to the bank that he had threatened to withhold over concerns about conditions. "Until now, I had not seen the evidence to show that the bank had made enough progress in implementing these changes," Benn said in a statement. "But having now considered the report... it does show real progress, and that is why I have decided to release the 50 million pounds." The report, obtained by Reuters, said the number of loan conditions has been reduced to about 11 from more than 30 in the mid-1990s. IMPROVING GOVERNANCE It said that the remaining conditions were concentrated on improving governance -- which donors have supported to increase transparency and crack down on corruption -- as well as financial and private-sector development. A bank official welcomed Britain's decision, which also followed discussions last month between Benn and World Bank President Paul Wolfowitz to resolve tensions over the bank's anti-corruption agenda and conditionality. "We welcome the bank board's unanimous agreement that there has been significant progress in implementing the 2005 conditionality recommendations and are pleased the UK has announced the release of funds," the bank official said. Britain is the World Bank's biggest donor country after the United States. Endorsement of the report came as the World Bank prepares for discussions, starting in March, with donors on replenishing funding for the International Development Association (IDA) for the next three years. The association is the bank's main lending facility for the world's poorest countries. A review of bank conditionality in 2005 found that conditions had shifted away from contentious areas like privatization and trade liberalization to governance and social sectors. Still, the report suggested more progress was needed to integrate the World Bank's analyses into policies developed by countries themselves, avoiding conditionality in sensitive areas and working closer with other donors to better coordinate program reviews. Development groups like Oxfam want donors to make the replenishment of IDA conditional on speedier progress by the bank in reducing its conditions further. "Progress has been made in tackling conditionality," Oxfam said in a statement. "However, this progress has been minimal, extremely variable and has proceeded at an unacceptably slow pace." Another group, ActionAid International, has called on the bank to commit to ending the use of economic conditions and to limit them to those debtor nations that ensure accountability.
| AlertNet news is provided by |  |