Rebranding adjustment: the World Bank and “development policy support lending”

24 July 2002

Structural adjustment had become unspeakable – fortunately the World Bank has come up with a new name. Content is less likely to change.

The Bank is considering renaming adjustment lending ‘development policy support lending’, but there are few signs that this will entail significant changes. The Bank argues that revision of its 1992 directive on structural adjustment will in fact only ratify changes that have already occurred. Renaming adjustment is supposed to reflect the shift from a short-term macro economic focus to longer-term concerns. The Bank claims that despite the “mixed performance” of adjustment lending in the 1980s, in the 1990s “the performance of adjustment has improved sharply as the lessons from experience and research evaluations were built into operations”. However many independent studies suggest adjustment has resulted in far less satisfactory outcomes in terms of human development, including in the 1990s (See SAPRIN findings overwhelming, Bretton Woods Update 28).

Following the adjustment lending retrospective initiated last year, the World Bank has issued a discussion paper for consultation before revising and reformatting its operational directive. The Bank sees this update as an opportunity to “better align” with the Monterrey consensus, the Poverty Reduction Strategy Papers approach and the IMF. The new policy attempts to take stock of lessons on adjustment, including the Structural Adjustment Review Initiative.

Among the issues the Bank’s Board will look at is the share of Bank loans devoted to policy-based lending. According to the Bank’s Articles of Agreement, World Bank loans should be limited to specific projects “except in special circumstances”. In recent years “special circumstances” have been subject to broad interpretation but the Bank says the share of policy-based lending has been limited to 25 per cent. There are serious reasons to believe that this formal ceiling will be removed to make way for case-by-case assessment by the Board. While some NGOs see policy-based lending as a constraint on countries budgetary sovereignty, others argue that budget support leaves governments with more flexibility than project loans.

But what will really be subject to debate seems limited. The operational policy will limit its application to Bank support for a specifically defined portion of a country’s reform program, focus on mandatory policy provisions distinct from desirable good practices, and “focus on the ‘when’ and the ‘how’ of Bank policy-based lending support for country reform programs, rather than on the nature of the country programs themselves”. As a consequence, the new policy, in contrast with the old one, would not include guidance on ‘development paradigm’ areas such as public finances, trade policy, privatisation, etc. Bank research and ‘knowledge management’ would provide World Bank views and good practice.

The increasing tendency towards less mandatory directives, more desirable ‘good practice’ is said to reflect recognition by the Bank that “there is no single blueprint for reform that will work in all countries”. Whether World Bank staff will use this flexibility to depart from the Washington/Monterrey consensus is doubtful. Moreover, not making policy assumptions explicit means they are not openly discussed, while the conversion could have provided an opportunity for such a discussion. While proposing a framework to assess possible impacts of structural adjustment lending on poverty or the environment, the current issue paper tends to focus instead on design and implementation of structural adjustment lending.

The design of the consultation process is also a cause for concern. The consultation plan was still vague by the time of the first consultation in London in mid-July. Regional consultations will include meetings in Africa, South and East Asia, Latin America and the Middle East. Major concerns had already been raised by more than a hundred NGOs last year in the early stages of the process. They called for an adequate time frame and access to information, as well as mechanisms to ensure accountability and broad-based participation, such as an independent external facilitator. It seems that most if not all of these concerns have been overlooked in the current process, adding to suspicions that the World Bank sees this consultation merely as a ‘ticking the box’ exercise.

When a name gets embarrassing

Then… …Now
Philip Morris Altria
Andersen Consulting Accenture
PriceWaterHouseCooper Monday
Thomson Thales
Compagnie Générale des Eaux Vivendi Universal
British Petroleum bp (“Beyond Petroleum”)
Structural Adjustment Development policy support

World Bank discussion paper and consultation plan

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NGOs 2001 letter

NGO possible strategies

WB 2001 response