IFI governance

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Parliamentary committee scolds DFID for its World Bank infatuation

5 March 2008

The UK’s International Development Committee has reprimanded the Department for International Development (DFID) for its decision to hand over a fifty per cent increase in funding for the World Bank without sufficient analysis of whether or not this is good value for money. The report also contains sharp analysis of the Bank’s failure to use impact assessments; its continued use of conditionality; and the British government’s lacklustre efforts to bring democracy to the Bank.

The committee welcomed DFID’s decision to increase its support to the World Bank’s International Development Association, or IDA (see Update 59). However, it said that the decision to provide the Bank with £2.1 billion was done with “insufficient rigour”. The committee has requested DFID to publish a full analysis of both how the increase in support was calculated, and how the money would do more to meet DFID’s objectives than using the same amount in other ways.

A strong stance was taken by the committee on the use of impact assessments, analysis which is supposed to examine the poverty and distributional implications of proposed policy reforms or investment projects. Ensuring that the Bank makes more transparent and consistent use of impact assessments “is the single most important change in Bank practice that DFID should be pursuing”. Committee members were “disappointed” that somehow this critical issue had “disappeared from DFID’s annual publication on the World Bank as the result of an apparent oversight”. They urged that progress in integrating impact assessments should be taken into account in any future funding rounds.

World Bank diktat is no substitute for thorough debate

The committee was not persuaded that the Bank is “pursuing an aggressive policy of imposing burdensome sensitive policy conditions on borrower countries”, however they reaffirmed that “World Bank diktat is no substitute for thorough debate and engagement of parliaments and other stakeholders by the borrower country government”. In line with civil society requests, they have recommended independent monitoring of the Bank’s adherence to its own good practice principles on conditionality (see Update 58). The Parliamentary Network on the World Bank will be pleased to learn that the committee recommended that DFID and other donors should consider providing funding for a larger secretariat to ensure its effectiveness and independence from the Bank.

On governance and accountability of the Bank, the committee took the government to task for sitting on its hands: “The UK must not only articulate a vision for reform of the Bank, but must pursue this with vigour”. Committee recommendations include: initiating work immediately on agreeing an “open and merit-based process” for selecting the Bank’s president; putting in place systems to evaluate the performance of the president; studying the merits of double majority voting; and adding “at least one more” African executive director on the board. DFID has been asked to ensure that the Bank’s policy of refusing to appear before parliamentary bodies is discussed at the board level “within six months”.

Recommendations on the Bank’s future remit and business model focused on its role as a ‘knowledge bank’ and its work on climate change. Paying heed to the evidence provided by the Deaton report (see Update 54), the committee has urged DFID to ensure that the ‘knowledge bank’ is “demonstrably neutral and flexible, providing well-argued menus of best practice options for effective development”. The committee saw merit in unbundling loans from policy advice, charging countries for the latter on a sliding scale.

The report cautioned against a “too literal interpretation of the Prime Minister’s assertion that the Bank should become an ‘environment bank'”, saying that the Bank would have to raise additional funds for this purpose. This poses a direct challenge to DFID’s double-counting adaptation and mitigation funds in its development assistance. The committee have recommended that DFID “conduct an audit of current bilateral and multilateral funds available for international climate change work” before any final decisions are taken about where to invest new funds. Finally, the committee has called for a “greater weight of subsidies for clean, renewable energy and less for extractive industries and this rebalancing should be happening at a faster rate than is currently the case”.