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Knowledge

Commentary

Bankspeak of the year 2005

23 January 2006

A rose by any other name:

2005 was the year that the Bank found itself increasingly isolated on the use of economic policy conditions. But rather than admit its conditionality-heavy approach had been mistaken, the sharp pencils at the Bank simply defined-away the problem.

The Bank’s conditionality review found that “the average number of conditions fell from 35 in the late 80s to about 12 in 2005″. However, a careful look at how the Bank defines conditions reveals that benchmarks – while not directly tied to the release of funds, but which can lead to a suspension of payments if ‘satisfactory progress’ is not being made in implementing them – aren’t conditions. Neither are triggers which include reforms which must be undertaken during the course of a lending programme to qualify for a subsequent programme. The only conditions that the Bank defines as conditions (and which, coincidentally, are the only type of conditions whose usage has fallen) are prior actions – reforms which must be completed before any money is handed over in the first place.

Clear are you? Well, neither are borrowing governments. The Bank was forced to admit that, in practice, the “distinction in the role of conditions and benchmarks is sometimes lost on borrowers”. Sometimes. A full seventy-five per cent of authorities responding to a Bank survey on conditionality did not make any distinction between conditions, benchmarks and triggers.

Obfuscation award (Bank):

Regular readers of the Bankspeak contest will remember that last year, the Bank was awarded for taking the rigorously defined free, prior and informed consent and changing it to its very own free, prior and informed consultation. All of the letters, none of the meaning.

This year, rather than bother with tweaking an old term, the Bank has come up with its very own obfuscation to determine whether or not a group of local people want a goldmine in their back garden: broad community support. BCS was created specifically so that the IFC safeguard revisions could avoid binding language. It was so woolly that even president Paul Wolfowitz admitted he didn’t quite know what it meant. So, to ground it even more firmly in the realms of ambiguity, the IFC committed to provide “non-binding guidance notes on broad community support”. So now communities won’t be able to hold the IFC to account to measures which they don’t understand.

Obfuscation award (Fund):

On the design of its new shocks facility, the IMF board was asked a simple but crucial question: how intrusive will the conditions be which countries have to implement in order to get their hands on the money. The response? “Structural conditions could be less ambitious than under a PRGF arrangement”. Considering that PRGF arrangements can contain up to dozens of conditions on everything from public servant pay scales to public enterprise privatisation, that could be leaving Fund staff with just a little wiggle room.

Stating the obvious:

A Bank study titled Reaching the Poor with Health, Nutrition, and Population Services makes the profound conclusion that “delivering health services coverage can be difficult, and that the rich are often better able to take advantage of these services although their needs are lower.”

Telling the truth on trade

Bankspeak has noticed a strange phenomenon at the IFIs over the past year which seems to be gathering momentum – telling the truth. And it seems to be happening more often than not in relation to trade.

First, in a Bank paper released at the beginning of the year on agricultural trade, the Bank said that a “development strategy based on agricultural commodity exports is likely to be impoverishing in the current policy environment”.

The Fund got in on the act, first with chief economist Arvind Subramanian asking why “international rule-making still operates as if we have a good fix on what kind of policies developing countries need”. Then, a paper from Fund economists Baumsgaard and Keen found that low-income countries have “very largely failed to recover from domestic sources such revenue as they have lost from trade reform”.

Most recently, a paper trying to explain why the Bank has been forced to back-pedal on its predicted gains to developing countries from the Doha round of multilateral trade negotiations blurted out: because “the most heavily protected economies have been growing more rapidly than the less protected.”

Carry on with trade liberalisation reforms promoting agricultural commodity exports then.