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Eurodad testifies at US House Hearing on World Bank conditionality

19 June 2008

Washington D.C. – Eurodad testified yesterday at a US Congressional Hearing aimed at evaluating and providing recommendations for the World Bank’s economic policy conditionality. Staff member Nuria Molina was one of four NGO representatives testifying at the House Committee on Financial Services Hearing, initiated at the suggestion of Committee Chairman Barney Frank.

The Hearing was aimed at informing members of the Committee on the World Bank’s progress on its Good Practice Principles (GPP) for conditionality approved in 2005, aimed at improving economic policy conditions for developing countries. The Bank claims that it has made good progress in implementing these principles, but Eurodad’s Untying the Knots report, published in November 2007, found that the Bank has exaggerated the pace of reform and still continues to apply onerous economic policy conditions.

The Hearing is crucial step before the House Committee can approve the US Treasury’s new funding for the World Bank’s International Development Association (IDA).

International development issues have been a long-standing concern for the Committee, which was influential in helping pass the recent Jubilee Act at the US House. Moreover, the Committee continues to call for a phasing out of all economic policy conditions at the World Bank.

The Hearing began with a presentation by the US Treasury, which asked the Committee to approve its financial envelope for World Bank resources. However, several members of the Committee expressed apprehension towards approving these resources amid concerns about the World Bank’s progress on conditionality.

Following civil society testimonies, further concerns were expressed regarding the Bank’s transparency on conditionality and its overly intrusive approach towards domestic concerns for developing countries. Further concerns dealt with the Bank’s privatisation of essential services, flexibilization of the labour market in relation to its Doing Business indicators and that Bank conditions may be worsening the food crisis.  

Eurodad suggests that the Committee should recommend to the US Government that the World Bank adopt a principle to end the use of economic policy conditions in all of its IDA lending. In the short-term the Bank should:

1. Ensure that parliamentarians, civil society organisations and other actors are able to participate in key decisions about World Bank lending programmes, prior to their implementation;
2. Provide more predictable aid by assessing conditionality progress every three years rather than every year;
3. Revisit the definition of ownership to ensure policies are country selected rather than there simply being government support for Bank selected policies;
4. Properly implement the Good Practice Principles - by ensuring that all new development policy lending is subject to an assessment that verifies that the principles have been properly integrated into its design, and reforming staff incentives to achieve this;
5. Work with donors to ensure annual independent monitoring of these new improved GPPs, that incorporate the views of southern governments, CSOs and independent researchers

Following the Hearing, the Committee will write a report for the US Treasury on a list of recommendations for the World Bank on conditionality. Furthermore, one congressman suggested that the Committee expressed interest in drafting a follow-up to the Jubilee Act, which will also include recommendations to the Bank to phase out economic policy conditionality. 

Please visit www.eurodad.org and the following links for related information:

Information on the Hearing: http://www.house.gov/apps/list/hearing/financialsvcs_dem/hr061808.shtml 

Critical conditions: the IMF maintains its grip on low-income governments:

http://www.eurodad.org/whatsnew/reports.aspx?id=2206  

Untying the Knots: How the World Bank is failing to deliver real change on conditionality