IFI governance


Rethinking the IFIs’ roles in conflict states

17 June 2008

A new report from peacebuilding NGO International Alert draws lessons for the Bank’s work from its experience in Burundi, Nepal and the Democratic Republic of Congo. The IMF is struggling to decide how to engage in conflict-affected states.

In 2006 the Independent Evaluation Group (IEG) released its review of World Bank support to ‘fragile states’, raising serious questions about both the way the Bank is organised internally to deal with fragile states and the system it uses to allocate resources to them (see Update 53). Since then, ‘fragility and conflict’ has been identified as one of six ‘strategic themes’ by Bank president Robert Zoellick.

The Bank has responded with a series of internal changes. The Low Income Countries Under Stress (LICUS) and Conflict Prevention and Reconstruction (CPR) teams were merged in 2007 to form a fragile and conflict-affected countries group; their accompanying trust funds are also being merged to create the State and Peace-Building Fund (SPF). A total of $100 million in World Bank funding is planned for the SPF in fiscal years 2009 – 2011, to be supplemented by bilateral contributions. A conflict, fragile states and social development team has been embedded in the Africa regional vice-presidency. A committee of managing directors has been established to discuss specific ‘crisis’ countries. Finally, during a January tour of African countries, Zoellick said the Bank had to figure out “some way to get additional private capital” to countries recovering from conflict, but it is unclear how.

The International Alert report welcomes the Bank’s increased attention and re-organisation, but asks whether internal systems continue to undermine overall effectiveness. The report highlights a number of issues:

  • the Bank places too much emphasis on formal institutions in assessing progress;
  • caution is urged before rushing to use budget support, country systems and aligning with government priorities in fragile states;
  • Bank staff require more multidisciplinary expertise, and should be free of pressure to meet spending targets;
  • the current ‘results’ framework fails to integrate a long-term change agenda; and
  • the Bank should not be afraid to take on high-risk projects, especially where national development progress depends on their implementation.

In turn, the report’s authors make a number of recommendations including institutionalising an analysis of power relations in Bank decision-making processes; amending the way results are measured to integrate political economy considerations; improving internal and external accountability of staff; and improving collaboration with bilateral partners. Emphasis in the International Alert report on the need for greater attention to issues of power and participation echoes the finding in a report last year by US-based NGO Gender Action that only a fraction of Bank reconstruction initiatives focused on the needs of women.

While providing useful process recommendations, the International Alert report chose not to address the theoretical foundations upon which the Bank’s conflict work is based. Heavily influential has been the work of former Bank economist Paul Collier. He has popularised the idea that greed is more important than grievance in explaining conflict, and that there are very high risks of reoccurrence of conflict within five years of resolution. Collier’s broadly-accepted conclusions have come under fire, even from within the Bank itself. In the 2006 evaluation of World Bank research known as the Deaton report (see Update 54), reviewer Daron Acemoglu said Collier’s methodology was inappropriate, was not at “the frontier of applied research”, and interpreted correlations as causal effects that “are really no more than correlations”.

IMF and conflict: spot the difference

In March, the IMF released an options paper on its engagement in fragile and post-conflict states. While describing the Fund’s work in fragile states as “broadly effective”, it highlighted a lack of capacity and the absence of a framework to guide operations in such countries. The paper’s authors recommend a new approach – the Economic Recovery Assistance Programme (ERAP) – available in two phases over five years. The first phase, would be a non-financing phase emphasising capacity building and would entail Fund endorsement of a macroeconomic policy reform programme. The second phase would provide financial support under concessional terms in return for reforms of “progressively rising ambition”. Staff and board assessments of progress on the reform programme would provide “a clear signal to donors”.

Long-time Fund watchers – and several board members – fail to spot the difference between this ‘new’ facility and existing Fund programmes. When the proposal was discussed by the board there was considerable disagreement over whether the new instrument was necessary. The board asked management to return to them with a follow-up paper.