Released late September to coincide with the Bank and Fund annual meetings, the paper sets out the “UK government position on the use of conditions in effective partnerships for poverty reduction”. Public comment is invited until the end of November and by early 2005 new guidelines for DFID staff are anticipated to put the new approach into practice.
Asserting that aid conditions must support and not “buy” reform, the paper proposes strategies to demonstrate to UK citizens and parliament that aid is well spent. For recipients, the goal is to work with other donors to harmonise aid, make it more predictable and limit overall conditionality. In “sensitive areas such as privatisation the UK will only use conditions to back reforms where partner governments have had space to debate-including where appropriate in parliament-the full range of policy options”.
UK NGO War on Want’s recent report Profiting from poverty: Privatisation consultants, DFID and public services, casts doubt on this commitment. Author John Hilary argued: “DFID’s mission is to eradicate poverty, yet it has taken the lead in promoting the privatisation of public services worldwide”.
The DFID paper suggests a country-led approach to Poverty and Social Impact Assessment (PSIA) and the linking of conditions to PRSPs. To ensure better transparency of DFID’s aid conditions, they will publish aid agreements on their website.
UK NGOs including ActionAid, Bretton Woods Project, WDM and Christian Aid that have been closely following the development of this paper have responded that the UK should:
Dissociate itself from the skewed notion of ‘ownership’ used by the IFIs, and press for an end to donor practices that undermine transparent and accountable national decision-making;
Take an explicit position ruling out the use of economic policy conditionality in aid programmes, and press the Bank and Fund to adopt the same approach;
Address the issue of IFI disclosure at the board, and press for it to be dealt with as part of the current reviews of Bank and Fund conditionality;
Make a stronger commitment to the routine involvement of parliaments in oversight of binding conditions prior to their agreement, and to greater involvement of civil society;
Press for a streamlining of IFI conditionality beyond an exercise in reducing headline numbers of conditions, and address the political intrusiveness of aid conditions;
Track its own programmes systematically to ensure that it delivers on the commitment to streamline bilateral conditions;
Critically examine the impact of selectivity in aid allocation (see at issue) on ownership and accountability;
Actively seek alternatives to the Fund’s ‘signalling’ role;
Examine its technical assistance programme, and ensure it supports local capacity and explores policy alternatives.
Recommend clear terms of reference for the review of World Bank conditions due to be presented to the Development Committee and IMFC at the 2005 Annual Meetings.
There remain question marks over the driving force behind these moves on the conditionality debate. Some observers fear that this shift is owed more to attempts by the BWIs to minimise the cost of doing business than recognition of the failure of policy conditions to generate economic growth or poverty reduction.