Memorandum submitted by Oxfam GB
1. Oxfam's submission to the International
Development Committee's inquiry into "DFID and the World
Bank" will focus on addressing the question of the compatibility
between DFID's own conditionality policies and those of the World
Bank. Oxfam acknowledges that there are many other key issues
that should be explored by the IDC in its inquiry, including World
Bank governance and its role in reducing climate change, but has
decided to focus on one aspect for the purpose of this submission.
INCOMPATIBILITY OF
DFID CONDITIONALITY POLICY
AND WORLD
BANK LENDING
2. In March 2005 the UK committed to a new
policy on "conditionality", outlined in its paper Partnerships
for poverty reduction: Rethinking conditionality. This policy
stipulated that UK conditionality would be guided by five key
principles: developing country ownership, participatory and evidence-based
policy-making, predictability, harmonisation, transparency and
accountability.
3. Importantly, the principles explicitly
committed the UK government to "not make aid conditional
on specific policy decisions by partner governments, or attempt
to impose policy choices on them (including in sensitive economic
areas such as privatisation or liberalisation", but instead
agree with partners a set of benchmarks, which related to impact/outcomes
and assess progress against these. The principles also explicitly
committed the UK government to support the greater use of evidence
in policy-making, and to press for the use of Poverty and Social
Impact Analysis (PSIA).
4. Oxfam research has found evidence that
the World Bank is flouting both of these specific commitments.
Our report issued last year, Kicking the Habit: How the World
Bank and IMF are still addicted to attaching economic policy conditions
to aid (see attachment) highlighted that the World Bank is
continuing to attach specific policy conditions to its development
finance that push privatisation and liberalisation. Drawing upon
the case of Mali, Oxfam revealed that the World Bank is attaching
economic policy conditions calling for cotton price liberalisation
on Malian farmers to their development finance. The report showed
that, not only has this resulted in a delay to much-needed funds
to Mali, but that it has also had a negative impact on poverty
reduction. As a result of price liberalisation, three million
Malian farmers faced a 20 per cent drop in the price they received
for their cotton[103]
according to the World Bank's own research this is likely to result
in an increase in poverty of 4.6% across the country.[104]
5. Our jointly authored report on Blind
Spot: the continued failure of the World Bank and the IMF to fully
assess the impact of their advice on poor people" (see
attachments) also reveals that the World Bank is still failing
to consistently ensure that there is a proper assessment of the
likely consequences of different policy actions on the poorest
people. The report cites unpublished World Bank research on PSIA,
which says that the process as currently carried out is not properly
embedded in the client country's own planning processes, and that
there is no systematic approach to the selection of reforms for
PSIA.
6. xfam believes that the UK government
should use its funding, in particular, to IDA to leverage crucial
reform within the World Bank, withholding additional funding to
IDA until the World Bank commits to end economic policy conditionality.
We also believe that the UK should push the Bank to present a
comprehensive strategy to ensure that country-led PSIA is included
in the design of, and carried out prior to, all key structural
and economic reforms or projects with a significant distributional
impact.
October 2007
103 Oxfam International, 2006: Kicking the Habit:
How the World Bank and the IMF are still addicted to attaching
economic policy conditions to aid. Back
104
Wodon et al 2006: Cotton and Poverty in Mali, World
Bank Draft Report. Back
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