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IFI governance

News

Bank study finds adjustment impact studies inadequate

15 June 1999

A leaked May 1999 draft Bank review of structural and sectoral adjustment loans severely criticises their treatment of environmental and social issues. The review assesses the design of 54 Structural and Sectoral Adjustment loans approved by the Bank between July 1997 and December 1998.

The review finds that Bank staff recommend complex reforms for countries with weak capacity, undertake minimal consultation with civil society and routinely ignore the Bank’s policy on adjustment lending (Operational Directive 8.60) which mandates examination of environmental issues.

The report, commissioned by the Bank’s Vice President for Environmentally and Socially Sustainable Development, contains some shocking findings:

Only 20 per cent of adjustment projects contain a substantial mention of potential environmental concerns. This compares with a 1994 Bank review which found that 60 per cent of such projects contained environmental goals or conditionalities.

On poverty it finds:

“the majority of loans do not address poverty directly, the likely economic impact of proposed operations on the poor, or ways to mitigate negative effects of reform. … The connection to poverty is left at the abstract level (e.g. the poor benefit from lower inflation and efficiency gains).”

The study urges “efforts to create a framework where environmental and social issues are considered an important aspect of the sustainability and effectiveness of our work.” This is important as 65% of World Bank commitments are now in the form of structural or sectoral adjustment loans.

The study will be finished later this year. It is not clear if it will be made public.

The leaked May draft of the report is available from the Bretton Woods Project.