World Bank must place economic transformation at heart of IDA20 replenishment

13 July 2021 | Guest comment

Aquaculture scientist at work, Malawi. Credit: Randall Brummett

The African Regional Organisation of the International Trade Union Confederation (ITUC-Africa) welcomes the early replenishment of the World Bank’s International Development Association (IDA), the World Bank’s low-income country arm. The Covid-19 pandemic has sapped the resources of countries around the world, with the poorest countries worst affected. They face economic devastation and staggering debt which threatens to reverse what little progress they have made over the last decade. These countries urgently need help in the form of concessional loans and grants. For most poor countries, current levels of public debt do not allow them to go to the commercial capital market for loans. We therefore consider the early replenishment of IDA20 concessional and grant-making resources essential to support recovery from the pandemic and to begin to address pre-existing developmental challenges faced by low-income countries.

ITUC-Africa agrees that the proposed IDA20 special themes of climate change, fragility, conflict and violence, gender, and jobs and economic transformation, and human capital, are issues of special significance in Africa where the majority of IDA-eligible countries are located.

Economic transformation requires a new policy framework

Whilst we agree on the broad policy themes underlying IDA20, several concerns remain. Principal among these is the policy context in which IDA funding occurs. In our view the policy mix proposed by the World Bank to date does nothing to tackle underdevelopment, and in fact institutionalises it. It is not enough for ‘jobs and economic transformation’ to appear on the list of policy themes for IDA20. Real and urgent action is needed, as described in the ITUC’s detailed proposal for the World Bank on job creation, social protection, debt relief, and labour standards.

It is...not enough for ‘jobs and economic transformation’ to appear on the list of policy themes for IDA20. Real and urgent action is neededKwasi Adu-Amankwah, General Secretary, ITUC-Africa

As the United Nations Conference on Trade and Development noted in its March 2021 report, before the pandemic, the policy matrix of austerity (fiscal consolidation), inflation targeting, trade and investment liberalisation, innovative finance (financialisation) and labour market flexibility have only produced stark inequalities, arrested development, economic and financial fragility, and unsustainable exploitation of natural resources. More than ever, countries in the Global South need a break from these counterproductive policies. Tackling the climate emergency, an important theme for IDA20, requires a movement away from dependence on natural resources. Trade and investment liberalisation foisted on poor countries has limited precedent in the history of countries that have successfully undergone economic transformation. It is the reason African countries deindustrialised in the 1980s and 1990s and have remained in the throes of balance of payment challenges ever since.

Economic transformation fueled primarily by the extraction and export of commodities that leads to deindustrialisation is a perverse transformation. It creates harmful agricultural policies which impoverish farmers and force them to flee from the countryside. That transformation has only created low productivity, indecent jobs and increased informality. Developing countries need real transformation. IDA20 must support policies that enable countries to improve agricultural capacity while building productive capacity in light manufacturing. This is the only sustainable way to create more and better jobs.

Social protection: Essential for workers and the economy

In the context of the Covid-19 and jobs crises, IDA20 offers an opportunity for the Bank to work with stakeholders to reverse past policies that dismantled worker protection schemes. Deliberate efforts are needed to promote worker’s rights, which are essential not only for workers, but also for the economy.

IDA-eligible countries need assistance to build or rebuild social protection systems that can offer tangible protection to workers and families in times of need. Covid-19 has shown the importance of installing such systems ahead of time. The World Bank is uniquely placed to help establish a Global Social Protection Fund that supports and protects all of humanity during crises. The situation where rich countries bailed out and vaccinated their citizens and poor countries looked on helplessly while their citizens suffered is a blot on the conscience of humanity and detracts significantly from notions of human progress. Only through the establishment of such a fund will low-income countries be able to avoid damaging lockdowns and prolonged crises driven by the unequal access to vaccines and related medical equipment (see Observer Spring 2021).

IDA processes must ensure adequate civil society consultations

Only by benefiting from the experience and expertise of civil society can IDA truly meet its stated development objectives. We therefore demand qualitative consultations on the IDA20 replenishment and all future IDA processes. After many years of organising workers in either public bureaucracies or the private sector and in engaging in the development policy processes, ITUC-Africa, and the union movement in Africa more broadly, retain potent knowledge needed to strengthen development processes. The current lack of consultation with civil society and union movements makes the it highly unlikely that the changes required to meet IDA’s overall objectives will be made in the IDA20 replenishment processes. The system in which limited civil society ‘consultations’ take place only after IDA’s policy packages have been largely agreed must be immediately changed. The IDA20 replenishment process must be a starting point for IDA to become truly responsive to the needs of the communities and countries it is mandated to support.