The policy lending doctrine: Development Policy Financing in the World Bank's Covid-19 response
At the beginning of the Covid-19 pandemic, the World Bank made it clear that it was going to use the crisis to promote its development vision and implement far-reaching structural reforms, especially those aligned with the promotion of ‘private sector solutions’. It also made clear that it would rely on Development Policy Financing (DPF) to carry out its Covid-19 response.
This report investigates the use of DPF in the WB's Covid-19 response, finding that a total of US$22.94 billion were committed for the 90 Development Policy Operations (DPOs) analysed, which included a total of 650 prior actions. Out of 90 DPOs, 45 were Covid-19 related.
Policy recommendations
The findings included in this report lead us to call for a substantive overhaul of the WB’s use of DPF. To prevent promoting a biased policy agenda, the WB should review its operational policy on DPF and adopt a policy that fully respects democratic ownership. This requires the Bank to:
- Minimise the use of prior actions
- End the use of economic policy conditionality, particularly when focused on fiscal consolidation and enhancing the role of the private sector in public services delivery
- Increase meaningful consultation with a wider range of stakeholders, including civil society organisations, trade unions and women’s rights organisations
- Promote reforms that are explicitly focused on strengthening public oversight and citizen participation in fiscal accountability
- Strengthen the Poverty and Social Impact Assessment of DPF including the development of a human rights policy and impact assessment methodology, to be applied to both projects and policy lending
- Adopt measures to increase the transparency and accountability of DPF, in order to enable citizens and civil society to monitor DPF projects and their impact on government policy.
The WB should also urgently conduct a new updated Development Policy Financing Retrospective to assess its contribution to the WB’s goals of eradicating poverty and enhancing shared prosperity.
Finally, to regain credibility and legitimacy, the WB must undertake a deep review of the way in which it conducts its research and translates it into country policy advice, including the use of policy conditionality and paid and unpaid technical assistance.