DFID snuggling up to the Bank?

14 April 2009

In February the UK Department for International Development (DFID) belatedly released its latest annual report on its relationship with the World Bank. This continues a tradition which sees these reports appear at irregular intervals.

This report appears 15 months after the last (see article), covering a period of 15 months from July 2007 to November 2008. A failure to stick to the definition of ‘annual’ reporting is not made up for by rigorous critique of World Bank performance over this time either. The report lists the Bank’s achievements and, as with previous annual reports there is a marked absence of the critiques heard from the Bank’s Independent Evaluation Group, Parliament’s International Development Committee or civil society for the period reviewed.

More money, less accountability?

In 2008, the UK pledged £2.1 billion ($4.1 billion) to the 15th replenishment of the World Bank’s cheap loan window, the International Development Association (IDA), to be released over three years (see Update 59). This was a 49 percent increase over its contribution to IDA 14, amounting to over £1 billion of contributions to the World Bank in 2008. In 2007 and 2008, UK was also the largest donor to World Bank trust funds, contributing £556 million in 2008 through DFID.

The annual report represents one of the few clear accountability channels to Parliament, civil society and those impacted by the Bank around the world. The 2009 report, however, makes no mention of the concerns raised at the International Development Committee’s sixth session of their annual enquiry held in March 2008.

The report includes five principles for 2009, replacing the 15 objectives in the institutional strategy of 2004-2008. The objectives are areas on which DFID will press the Bank to deliver stronger performance. Specific criteria to assess them at the end of the year are noticeably lacking.

DFID staff assert that annual priorities will be more responsive to the immediate context than a three to four year plan, but critics worry that the lack of measurable objectives indicate that the level of scrutiny DFID will apply to the Bank may be diluted further.

DFID’s five Priorities

DFID’s five priorities for the Bank cover many key issues, the first of which is supporting developing countries dealing with the economic downturn, stating it will press for counter-cyclical support to low-income countries. There is little evidence for this so far, as of the $1.1 trillion stimulus package announced at the London summit, only 5 per cent or $50 billion will be available to developing countries. Most of these funds (which are not additional to existing commitments) will be available as loans through the IMF and the Bank .

The second is to support stronger Bank focus on environmental sustainability, climate resilient development and low carbon growth. Both the report and this priority state wholehearted support for the Bank’s Climate Investment Funds failing to acknowledge the continued criticism of these funds for usurping the UN’s role and allowing the funding of fossil fuel projects (see Update 62). DFID intends to channel £800 million into Climate Investment Funds (CIFs) claiming that “2008 was a watershed for the Bank’s work on the environment.” It overlooks criticism of the Bank’s work on the environment based on the IEG findings of July 2008 that “the priority given to environment and natural resources management (ENRM) appears to be modest.”

The third priority intends to improve the delivery and effectiveness of Bank assistance and the way it works with others, especially in Fragile and Conflict affected countries. This picks up on some unfinished business of the previous strategy; accelerating decentralisation, and increasing focus on conflict affected countries where progress on the MDGs is hardest. There is no mention however of how DFID’s approach will change to address the lack of progress.

The fourth priority is to press for a stronger focus on gender equality – progress for women is central to achieving the MDGs. DFID itself has been criticised by the OECD Development Assistance Committee (DAC) for the low profile it has given to gender, and has worked to change its own internal culture to ensure that gender is integrated across the board. Gender is a new addition to DFID’s priority list for the World Bank. But of the new priority Laura Turquet from ActionAid says “this has all been said before. The Bank needs to mainstream gender but there is no sign here of any firm deadline for when DFID will demand to see that change.”

Finally the fifth priority highlights the need for improvements in Bank governance to increase developing country voice and make it more efficient and effective. DFID claims it will press the Bank to “agree principles for more radical reform of voice and representation that will lead to a rebalancing of voting power,” which critics say is hard to square with their continued opposition to giving borrowing countries a parity of vote with lenders .

While these objectives are necessary and timely they lack specific targets beneath the top line objectives. DFID has not presented criteria for how it decides to allocate resources to the World Bank, surmising that the Bank should be trusted as a safe pair of hands. This leaves the impression that DFID and the Bank enjoy far too cosy a relationship.

Parrot fashion

The annual report shies away from critical analysis, giving the World Bank a strong endorsement as “one of the most effective international development organisations.” It claims that DFID continues to “when necessary – challenge the Bank to deliver on its commitments” but there is little evidence of this in the report which mostly lists the Bank’s activities as evidence of its achievements. On a number of highly contentious areas such as the Bank’s work on climate change (see Update 62), agriculture (see Update 58), and its approach to healthcare (see Update 65), the Bank is simply presented as a good performer.

Describing the Bank’s work promoting agricultural development, DFID fails to mention the barrage of criticism by NGOs in response to the October 2007 World Development Report of the Bank’s role in agriculture.

On conditionality the report claims the UK has been instrumental in securing commitments to reduce conditionality at the IDA 15 replenishment. It states that sensitive conditionality for fragile states (on privatisation and trade liberalisation) will be avoided, though there is no clear Bank commitment to this, and other reports have found the Bank continues to use conditionality in sensitive areas (see Update 64).

On debt relief, DFID praises the impact of debt relief in countries that have benefited. While these benefits are impacting the countries that qualified for the Heavily Indebted Poor Country (HIPC) Initiative and ensuing Multilateral Debt Relief Initiative (MDRI) the report fails to highlight that only 23 out of the 67 poorest countries are receiving this relief. Sarah Edwards of the Jubilee Debt Campaign comments that this debt relief “goes nowhere near far enough, it does not tackle fundamental issues such as creditor responsibility and debt legitimacy; conditionality; and the need for a comprehensive framework for dealing with sovereign debt.”

Backtracking and inconsistency

The review of DFID’s 2004 institutional strategy released in December 2008 assesses Bank progress on the strategy’s original 15 objectives. It finds one ‘fully achieved’, one expected to be fully achieved, eight ‘largely achieved’, four ‘partly achieved’ and one ‘not achieved’. There is very little solid evidence however for the progress that has been made. The one objective ‘not achieved’ was to press the Bank to demonstrate robust support for aid absorption based on sound analysis. Failure is explained by the fact that Bank guidelines were not widely used, but the review claims that through a different internal process adopted there was still much progress.

On conditionality, largely achieved, the UK government appears to be backtracking on its demands. DFID took a strong stance in 2006 when it demanded a report after dismissing Bank claims that reform on conditionality was broadly working. Now it simply endorses the Bank’s own progress report of 2007.

On poverty and social impact assessments (PSIAs) the objective – deemed largely achieved – was measured only by quantity on the basis of 40 completed PSIAs. The qualitative goal, ensuring that PSIAs were country-led, was not measured. There is no mention of the Oxfam-led coalition of NGOs that called on donors in October 2007 to ensure that “country-led PSIA be used in all IDA-supported financing with a major distributional impact” and there are no firm commitments to do so (see Update 58).

The objective on debt sustainability is expected to be fully achieved, even though only 33 of the 44 countries eligible for the MDRI had received either full or temporary debt relief by the time of the review.

Finally in contradiction to the annual report, the review gives little credence to the changes on governance of the World Bank made at the 2008 annual meetings. Whereas the DFID annual review touts the package of reforms as a step forward the review states “there has been no progress on reforming the selection of the World Bank president and little on increasing developing country voice at the board,” echoing the concerns of civil society. Could this be a difference of opinion or was the review rushed to completion without the relevant information?