Also available as fully-formatted 2 page PDF

The World Bank and IMF are making an audacious grab to consolidate their roles as judge and jury of countries’ policies. At their Spring Meetings they aim to secure ministerial agreement for a plan to conduct “regular reporting on the implementation of the policies and actions for achieving the MDGs and related development outcomes”. Not content with the vast amount of analytical work they already do, the Bank and Fund would like to become the arbiters of development progress by all governments.

The UN is better placed to follow up on the Millennium Development Goals (MDGs), a set of outcomes agreed and discussed at two major recent UN summits. The World Bank and IMF, as powerful creditors, lenders and advisers, face conflicts of interest in producing objective public reports on their client countries’ policy approaches. Asking these institutions to agree and report on the ‘right policies’ contradicts the intention of the Poverty Reduction Strategy approach, which is supposed to allow developing country governments to devise their own policies. The Bank and Fund are hardly in a position to judge the performance of others when they are making only very slow progress to introduce systems for reporting on the impacts of their own spending.

UN versus Bretton Woods

A report produced by Bank and Fund staff for the Development Committee meeting of ministers in Washington DC on 13 April proposes that the UN deliver country level outcomes data while the WB and IMF produce reports on country policies towards the MDGs. This division of labour has been strongly challenged by civil society groups as well as by some European governments.

The paper mentions the role of the UN in producing an annual global report on MDG targets and indicators, as well as country MDG reports and a research project to identify approaches for achieving the MDGs. Bank and Fund staff are involved in these in various ways. The Committee paper also mentions the roles of the WTO and the OECD Development Assistance Committee in assessing countries’ trade and aid policies respectively. However the Bank and Fund then proceed to ignore these existing initiatives and propose to establish themselves as the institutions in charge of producing an annual report on “the implementation of the policies and actions for achieving the MDGs and related development outcomes”. This would be prepared by Bank and Fund staff with unspecified “cooperation with the staff of partner agencies”.

“[while] the corporate commitment to MDGs is very explicit new incentives are not yet in place, and frontline staff feel some uncertainty. Are [MDGs] an add-on or a basic rethinking of priorities?”

Annual Report on Portfolio Performance, World Bank 2003

The Bank and Fund propose to monitor 12 aspects of developing country policies and six of developed countries. For Southern countries this will include four sets of economic and financial policies, four sets

of social sector policies, public sector governance, and environment policies and institutions. For the North they plan to assess trade, debt relief, aid quality and quantity, and overall macro policies. The hubris of trying to create an objective methodology for assessing the status of countries on matters such as “voice/inclusion”, “public administration” or “social protection” does not appear to concern the Bank/Fund staff who drafted the paper.

It’s the incentives, stupid

Not enough? Current WB/IMF policy assessment exercises

The Bank and Fund recognise that in making this bid to oversee global development results, they must continue “ongoing efforts by the Bank and the Fund to increase their own transparency and effectiveness”. Since Wolfensohn became Bank President in 1995 he has often said he would reorient his institution to focus on “results on the ground”. But the systems he has put in place have still not transformed a culture which prioritises the volume rather than the quality of lending.

There have been frequent complaints that the Bank operates more like a bank than a social development agency; staff face pressure to make new loans, regardless of their likely impacts. This was given high-level recognition in a report by a Bank Vice President in 1992 but persists as a major issue. The Bank’s main annual evaluation report, released March 2003, points out the continuing need to sort out this problem. “Appropriate incentives must be ensured – in countries and within the Bank – to monitor and evaluate performance against development outcomes (as opposed to simply measuring performance in terms of resources disbursed, as has traditionally been the case)”.

The IMF‘s Independent Evaluation Office reached a similar conclusion last September: “internal incentives in the IMF encourage overpromising programs. The relatively short time frame of programs forces optimistic assumptions. Even when risks were well identified during internal review, the assessment was not candidly presented to the Executive Board”.

Recent Bank documents – including the Annual Report on Development Effectiveness – reveal that there are still no concrete proposals of how to match evaluate outcome evaluation with staff performance. In

March, Bank President Wolfensohn told The Observer: “I don’t think I need more incentives. Most of our people like recognition so there’s a big emphasis on results-based activity. But it’s very difficult in any organisation to identify a direct link between your individual project and an effect ten years hence in results on educational levels”.

Making policy analysis more independent

Senior academics and powerful shareholder government officials are persisting with calls for deeper reforms of the institutions to prevent analysis being skewed by the pressure to lend money. Many of them also want the Bank and Fund to stop dominating research in so many policy areas, leaving it instead to national agencies or other international ones. Ravi Kanbur, formerly the Chief Economist of the Bank’s Africa region and now a professor at Cornell University, points out that “the Bank as a whole cannot possibly be viewed as an independent arbiter of social science research. It is owned by the rich countries, and it has operational policies that need to be defended”. He therefore urged that “more of the research at the Bank should be farmed out to universities and transparently independent institutions”.

Similarly Edward Balls, Chief Economic Adviser to the British Treasury recently urged “reviewing more fundamentally the institutional architecture of the surveillance and programme functions of the Fund and Bank to ensure surveillance is dispassionate and independent, and not coloured by time pressures or programme responsibilities.” “At present,” he told an audience at the Institute for International Economics in early March, “working to reach agreement on a programme and to restore confidence, there may be incentives and pressures on the Fund to be over-optimistic. The blurring of the surveillance and programme mandates makes it difficult for the Fund to be held accountable.”

Global versus country priorities

The Bank now trumpets figures about improving loan quality, but many of these are self-referential and self-assessed. The Bank’s latest Annual Review of Portfolio Performance recognises that “portfolio improvements have been over-estimated in recent years.” And Robert Wade, a professor at the London School of Economics, comments “no measures of the Bank’s performance survive much scrutiny… the fact that small [indicator] movements are treated as very significant by important external entities throws a strongly political imperative into the apparently technical business of performance measurement”. The external entities he is referring to include most importantly the US government which last March offered an 18 percent funding increase for the Bank if it would demonstrate it can use the funds to achieve measurable results.

Concerns that a fixation with results might skew funding allocations and stifle democratic policy choices are being overlooked. Citizens Network on Essential Services has made precisely this point. World Bank rating criteria “represent implicit policy prescriptions and defeat the purpose of the PRSP initiative. Cash-strapped governments may not feel that they can afford to listen to citizens when it could lower their rating and jeopardize their flows of external assistance.”

“If the Millennium Goals are to be achieved, ordinary citizens must feel a true sense of ownership. We need the determined commitment and active backing of the multilateral institutions, but this must be done in such a way that the MDG campaign does not come to be seen solely as the UNDP‘s or World Bank’s baby.”

Kumi Naidoo, CIVICUS (World Bank Lecture, February 2003)

The Bank claims it will be able to square this circle of standardised global policy indicators and the principle of nationally devised and owned policies by helping ‘localise’ MDGs. This appears to mean that countries will have to report on the standard indicators but can also add some additional country-specific ones. The two actions anounced to help achieve this – Poverty and Social Impact Analyses and “results-based Country Assistance Strategies” – primarily involve increasing the amount of World Bank in-country analytical work. This will aim to set out how Bank activities in a country will contribute to achieving specific objectives. The current proposals, however, will not push Bank staff to take up new approaches as they are based on weak self-assessment, with limited peer review by other Bank staff.

The Bank claims Vietnam is an example of donors helping to ‘localise the MDGs’. However, this seems to have amounted more to producing a series of glossy sector strategy documents, which – in the end – the government decided not to adopt. The “results-oriented CAS” touted by the Bank in this country also does not contain explicit measurable performance indicators tied to its own activities.

Conclusions

The Bank and Fund are not the appropriate vehicles to whom the international community should entrust reporting on the adequacy of development policies. There is an extensive literature questioning the relevance and quality of their policy advice. This mainly blames their political make-up, skills mix, distance from ground-level and conflicts of interest because of their lending roles. They are also reluctant to listen to others or admit that they have been wrong: preferring self-referential policy enquiry and apportioning blame to others – governments, unforeseeable shocks, etc., when things do not go as planned. Because they also face perverse incentives as major creditors of the countries concerned they should not take the lead in assessing policies towards the MDGs. Rather than extending their roles in policy analysis they should scale back and reorient their existing capacity, focusing instead on reporting on the impacts of their own lending.

April 2003