IFIs in post-conflict countries: role, activities and impacts

World Bank-IMF annual meetings 2007

23 October 2007 | Minutes

This meeting was an information-sharing session on the World Bank and IMF’s recent increased scale up of involvement in post-conflict countries and fragile states. It involved presentations from Markus Kostner, World Bank; Sarah Cliffe – former head of the World Bank fragile states unit; and Louis-Dicks Mireaux, deputy division chief, policy development and review department, IMF.

Markus Kostner, World Bank

The World Bank’s low income countries under stress (LICUS) department and fragile states unit were recently merged to form “fragile and conflict affected countries”, given that many conflict affected countries are also fragile states.

The policy framework is based on development cooperation and conflict. It considers good development, and what the Bank can do during a conflict. There has been a strong push for better partnership with the UN system and OECD-DAC donors. Their unit provides strategic guidance.

Sarah Cliffe – former head of World Bank fragile states unit

We need to be aware of the risks of conflict and make links between our work and peace-building objectives. There are many links between natural resources and conflict, such as in Liberia and DRC. Consequently we have made partnerships with the UN and other institutions that have peace-building expertise, as well as CSOs. The conflict analysis of the World Bank’s programmes is based on a principle of “do no harm”. “Peace-building” is allowed to be achieved as an objective, such as in Haitian townships. On building state institutions, lots of economists are good at critiquing budgets but not at basic state functions. The Bank tries to have staff in the field who understand local conditions.

Their assistance starts with small grants. When a country re-engages they receive grant-based not credit-based assistance. Attracting business can not wait until a later stage. For instance Timor-Leste very successfully established health/education services within 3 years, but didn’t get enough business recovery transition to create jobs. When there is a large population of young men, creating jobs is important.

Some types of reforms have good track record of working fast, e.g telecommunications privatisation. Need to pay attention to natural resource rents – such as through the Extractive Industries Transparency Initiative, the Kimberly process and other mechanisms for oversight.

Accountability is key – it is better that parliaments have their own oversight but when government is weak this is not always possible.

Louis-Dicks Mireaux, Deputy Division chief, Policy development and review department, IMF

The policy development and review department is not a formal separate unit. They make frequent visits to post-conflict countries, such as Afghanistan and Iraq. Their main interlocutor is the ministry of finance and central Bank. Their key role is to improve economic management and performance, and strengthen capacity. They provide technical assistance through visits and resident advisors.

In the realm of conflict, improving economic management and performance, and getting control over inflation is key, as is pinning down what is on/off budget. Central government is in desperate need of funds, and responsible fiscal management is important. External donor assistance is crucial. Donors are more likely to give general support if they do not have to worry about money going into a bottomless pit.

There are several ways of intervening:

  • General surveillance – very intensive hand holding and currency exchange. Staff monitored programmes – no money or formal conditionality
  • Emergency post-conflict assistance. Limited amounts of money. This sends a stronger signal. They won’t go in unless there is a coordinated approach from other countries.

There are many “donor orphans” in fragile states because they have limited results to demonstrate. They will put a paper to the board later this year which will propose more formal and strengthened engagement.

We warn countries not to distribute licences to unscrupulous profit-making companies, such as in Burundi. There is a need for intervention in private investment but we do not want to distort the market.

Questions from the floor:

  • How do you justify public accountability when the state is weak, and you are intervening and suggesting policies? Bank response: We would like to involve CSOs more, in the case of Chad we established a social oversight committee.
  • Have you considered the extent to which the creation of formal jobs leads to a huge displacement in the informal sector in mining?
  • Is the privatisation of public agencies legitimate? Bank/Fund response: privatisation is a very sensitive issue. It needs ownership, you can’t force the pace
  • To what extent are you engaged in child protection? Response from IMF: “I don’t touch children”. Bank response: We have done a lot of work on child soldiers and disarmament, demobilisation and reintegration. We work closely with UNICEF.
  • Can you make technical assistance documents public?IMF response: We can not make these publicly available as our membership has deemed it inappropriate due to their sensitive nature. I suggest you contact the government to see if you can get hold of them.
  • In relation to your emphasis on accountability, how do you react to the concern highlighted in the IEG report that more work is needed on adherence to environmental and social safeguards and transparency, particularly given the increased involvement of IFC in LICUS and fragile states? Bank response: This wasn’t in the main conclusions section of the IEG report. There was a lot of pressure from civil society within Chad to keep the channel of communication open. At what point should one engage/disengage?