Untying the knots - How the World Bank is failing to deliver real change on conditionality

Added 09 Nov 2007

In 2005 the World Bank launched a review of its conditionality policy. This was in response to growing international criticism, from developed and developing countries alike, that the World Bank was still attaching too many intrusive and, at times, harmful economic policy conditions to its development finance to poor countries. 

Two years on from this important step, the World Bank is keen to represent the problem of conditionality as one that has been dealt with, and that is no longer a major problem in lending.  In order to independently assess whether or not this is the case, this report, by the European Network on Debt and Development (Eurodad), assesses the effectiveness of the World Bank’s Good Practice Principles (GPPs) in reforming World Bank conditionality.

The report finds that the GPPs have, as hoped, had a positive impact in reducing the overall number of conditions that the World Bank attaches to its development finance in poor countries. However, unfortunately there has been very limited progress in curbing the Bank’s practice of attaching sensitive economic policy conditions like privatisation and liberalisation conditions to its lending.

The Bank may be slimming down the number of conditions it uses in developing countries, but it is still making heavy use of economic policy conditionality, especially in sensitive areas such as privatisation and liberalisation. 

In short, this report highlights serious concerns with the Bank’s implementation of the Good Practice Principles.

Eurodad, along with NGOs across Europe, believe that the World Bank should end its use of economic policy conditionality, which too often promotes sensitive and externally induced policy choices. Instead, grants and loans should be accompanied by a set of responsible financing standardswhich are mutually agreed by the Bank and recipient countries.