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Bretton Woods Observer Winter 2015
A quarterly critical review of developments at the World Bank and IMF

Published by BRETTON WOODS PROJECT
Working with NGOs and researchers to monitor the World Bank and IMF

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1.  The IMF’s role in the Ebola outbreak:The long-term consequences
of structural adjustment
 (IFI GOVERNANCE/Analysis)
2.  Bank failed indigenous peoples in Ethiopia  (RIGHTS/News)
3.  WDR 2015: Mind over matter  (KNOWLEDGE/News)
4.  Nigeria water privatisation questioned (RIGHTS/ Commentary)
5.  The Arab world’s subsidy nightmare: pondering alternatives - by
Hassan Sherry, Arab NGO Network for Development, Lebanon
(CONDITIONALITY/Commentary)
6.  IMF loans and conditions increasing (CONDITIONALITY/Analysis)
7.  Eye on the prize: the Greek debt sustainability question
(FINANCE/News)
8.  IFC ignores concerns about investments in financial
intermediaries  (PRIVATE SECTOR/News)
9.  Inside the Institutions:Guide to the Independent Evaluation
Office (IFI GOVERNANCE/Background)
10. Out with the new, in with the old? World Bank restructure reveals
“colonial mindset” (IFI GOVERNANCE/News)
11. UN experts critique World Bank draft safeguards (RIGHTS/News)
12. World Bank pricing carbon: real solution to climate change?
(ENVIRONMENT/Analysis)
13. Recommended resources on 2014
14. Bankspeak of the year 2014

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TOPIC:HEALTH: Analysis

1. The IMF’s role in the Ebola outbreak: The long-term consequences
of structural adjustment

Abstract
IMF conditionalities attached to loans to Liberia, Sierra Leone and
Guinea drained health services, damaging countries’ ability to handle
the recent Ebola crisis.

Summary:
- Decades of IMF lending to Ebola-affected countries led countries to
prioritise debt payments over public services
- Health services have been starved of investment, including vital
public health infrastructure
- Mounting pressure on the IMF, including from the G20, to relax
spending restrictions and forgive debts

As 2015 began, the world received a sobering message. Not only have
the number of Ebola cases exceeded 20,000, but in some affected
countries, especially Sierra Leone, the virus is still spreading. The
death toll now tops 8,000 and the usual answers to how this outbreak
got so huge so quickly – poverty, bad governance, cultural practices,
endemic disease in Guinea, Liberia  and Sierra Leone – are giving way
to a deeper questioning of the poor public health response. Critics
are turning to the structural causes of weak health systems and
increasingly showing that international lending policies, including
and especially those employed by the IMF, should carry much of the
blame.

The IMF has been active in West Africa for many years; the first IMF
loan to Liberia was in 1963. And for almost as long, public health
activists have pointed to the detrimental effects of the strings the
IMF attaches to its loans, known as conditionalities, which more
often than not constrain investment in public sector health services.
All three countries were engaged in IMF programmes when the Ebola
crisis began. As a December 2014 comment in medical journal, the
Lancet explained, the IMF has provided support to Guinea and Sierra
Leone for nearly two decades, and to Liberia for seven years. IMF
conditionalities meant countries have had to prioritise repaying debt
and interest payments over funding critical social and health
services. Countries such as Guinea, Sierra Leone and Liberia have had
to limit not only the number of health workers they were able to hire
(Liberia had only 60 doctors before the Ebola outbreak, Sierra Leone
had 136), they’ve also had to cap wages to a pitifully low level to
meet broader IMF policy directives. The Lancet comment also points
out that in Sierra Leone, IMF-mandated policies explicitly sought to
reduce public sector employment. In 1995 -1996, the IMF required the
retrenchment of 28 per cent of public employees. The World Health
Organisation reported a reduction of community health workers from
0.11 per 1,000 population in 2004 to 0.02 in 2008. Caps on wage
spending continued into the 2000s. The Lancet authors state, “By
2004, [Sierra Leone] spent about 1.2 per cent of GDP less on civil
service wages than the sub-Saharan African mean.”

The problem is, the IMF requires cuts to the same public systems that
could respond to a health crisis before it sweeps across the country.
When countries sacrifice budget allocations to meet macroeconomic
policy prescriptions, as per the IMF’s decree, it is at the expense
of social spending. Without money to fund basic infrastructure,
health facilities are left crumbling, sometimes without access to
water or electricity, and completely unprepared for complex
emergencies. Few health workers are trained in infectious disease
control, and those that have received training lack protective
equipment and materials due to non-functioning supply systems. It is
no wonder that when a truly serious epidemic such as Ebola entered
the scene, the West African countries, which have had to deal with
IMF conditions for decades, found themselves struggling to respond.

A considerable amount of money has poured in to fight Ebola, about
$1billion so far, some of it from the IMF itself. Just how much of
this money will go to build health systems, though, is under debate.
In the past, IMF austerity conditionalities included directives to
put aid money away in national reserves for a rainy day. Indeed,
research has shown that increased funding for health, while under the
influence of IMF programmes, actually reduces governments’ spending
on health – because if they did, they would be violating the
conditions of IMF loans. So the $1billion of Ebola aid that could
help to build the very same health systems that had deteriorated from
decades of IMF constraints is constrained once again and is diverted
to fund one-off NGO projects or short-term UN programmes.

There is a growing chorus calling for reform to IMF policies, and the
slow response to Ebola has shone a light on just how weakened the
health systems have become after decades of restrictions in the name
of economic reform. First among this chorus are the presidents of
affected countries. At an October 2014 press conference with the IMF,
World Bank, and presidents from Guinea, Sierra Leone, and Liberia,
Guinean president Alpha Condé remarked, “I’m extremely pleased to
hear the IMF managing director [say] that we need help and we can
increase our deficit, which is quite a change from the usual
narrative.”

Pressure has come from all sides for the IMF to loosen its
restrictions on deficit spending as well as to forgive billions of
dollars in debt and to rechannel those debt servicing payments to
fund lifesaving health services, supplies, and desperately needed
personnel to respond to what has been an overwhelming patient load.
Even the G20 issued a statement in November 2014 urging the IMF to
“ease pressures on Guinea, Liberia and Sierra Leone, through a
combination of concessional loans, debt relief, and grants”. The US,
the largest shareholder of the IMF, is also pushing to erase about 20
per cent of the three countries’ total IMF debt. Had these measures
been taken a decade earlier, and the resources invested in public
sector health systems, it is likely the Ebola outbreak could have
been quickly contained and thousands of lives saved. The US Congress
has pledged $5.4 billion in its 2015 budget, $2.5 billion of it going
straight to African countries in their efforts to fight or prevent
the virus from entering their country.

That’s all a good start, but we’ve got to learn the true lesson from
the Ebola crisis to prevent the next public health crisis in Africa.
IMF conditionalities must end, debt cancelled, and health systems
built – no strings attached.
Julia Robinson and James Pfeiffer, Health Alliance International

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TOPIC: RIGHTS
News

2. Bank failed indigenous peoples in Ethiopia

Abstract/ summary
A report by the World Bank’s Inspection Panel has confirmed that the
Bank was non-compliant with its policies on a project in Ethiopia,
including on indigenous peoples' rights.

A November 2014 report by the World Bank’s accountability mechanism,
the Inspection Panel, found the Bank to be non-compliant with its own
policies, including on indigenous peoples rights, on a project to
increase access to basic services in Ethiopia. The report responded
to a 2012 complaint by indigenous people from the Gambella region.
They claimed to have been severely harmed by the project, due to its
alleged links to a government ‘villagisation’ programme that has led
to “forced evictions” (see Update 86, 82).The report found “an
operational link” between the programmes.

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KNOWLEDGE:
News

3. WDR 2015: Mind over matter

Abstract/summary
Behavioural economics is the basis for the World Bank's 2015 World
Development Report but is criticised for ignoring the impact of power
and politics.

The World Bank’s 2015 annual World Development Report, published in
December 2014, uses behavioural economics to scrutinise “how humans
think … [to ...] improve the design and implementation of development
policies ... that target human choice and action” in areas such as
health and climate change. However, Duncan Green of NGO Oxfam blogged
about the report’s limitations, including a lack of consideration of
“the importance of power and politics in (mis)shaping mind, society
and behaviour”.

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TOPIC: RIGHTS
Commentary

4. Nigeria water privatisation questioned

Abstract/summary
Civil society in Nigeria has criticised and called for disclosure of
a water privatisation scheme in Lagos involving the World Bank.

Civil society in Nigeria has criticised and called for full
disclosure of a water privatisation scheme in Lagos involving the
World Bank. In late October 2014 the Bank claimed the advisory role
of its private sector arm, the International Finance Corporation
(IFC), was cancelled. However, according to January media reports the
privatisation plans are still going ahead. Akinbode Oluwafemi of NGO
Environmental Rights Action and Friends of the Earth said: “For
decades, the World Bank has driven the privatisation of water
worldwide … with devastating consequences for people’s ability to
access safe, clean water.”

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TOPIC: CONDITIONALITY
Commentary

5.The Arab world’s subsidy nightmare: pondering alternatives
by Hassan Sherry, Arab NGO Network for Development, Lebanon

Abstract/summary
For decades, the Arab region has embarked on a series of IMF-
prescribed energy subsidy reforms, which have contributed to
increased poverty levels.

For decades, policies maintaining tight control of domestic energy
prices have shaped the political and economic environment in most
Arab countries. According to the IMF, expenditures on energy
subsidies by governments of the region have accounted for about half
of global energy subsidies, amounting to almost $240 billion in 2011,
nearly 8.5 per cent of the region’s GDP. This is explained by the
fact that redistributive commitments of Arab countries, largely
through the reallocation of rents, have shaped the social contract
since the independence years following World War II.

Many in the Arab world perceive energy subsidies as an important
social safety net for the poor in a region where poverty is
widespread. According to a 2012 UN Development Programme report
poverty levels range from 11 per cent in Jordan to 30 per cent in
Morocco, 40 per cent in Egypt, and close to 60 per cent in Yemen. The
report argues that subsidies are a form of public benefit which
boosts industrial growth. Crucially they also enhance access to
energy, an underlying condition for achieving the Millenium
Development Goals, in a region where 65 million people had no access
to electricity in 2002.

For the past three decades, however, the Arab region has embarked on
a series of externally driven and designed structural adjustment
programmes prescribed by the IMF, in which the unwinding of general
subsidies, in particular energy subsidies, has been a core
ingredient. Although these programmes have failed to prevent rising
poverty and unemployment in the region, and induced further wage cuts
and a shift from the productive manufacturing sector to the service
sector, the reform of energy subsidies remains among the core
components of IMF policy advice to Arab countries. Civil society has
argued that such reforms, which at no point were part of a
comprehensive economic and social development plan, required fiscal
retrenchment that betrayed the social contract, thereby triggering
the recent uprisings and socio-political transformations.

The IMF has treated energy subsidies as a policy tool that is
expensive, inefficient and regressive over the long-run, which
reduces incentives for investment in renewable energy and diverts
public spending away from key social programmes, such as health and
education. While subsidies create budget pressure, the IMF has
overlooked the political context and social implications associated
with its approach. It has proposed mitigating measures to accompany
the reform process, including expansion of social safety nets;
targeted energy subsidies and/or cash transfers; and universal
programmes, which involve the elimination of energy subsidies in
favour of a system of universal and untargeted cash transfers
intended to benefit a wide spectrum of society.

The measures may sound practical, but face major constraints when
considering under-developed social protection schemes in Arab
countries, corruption and the absence of transparency mechanisms.
Moreover, in a region where administrative capacities are inadequate
and informal economies are large, targeted subsidies are infeasible.
Evidence from Egypt suggests that safety nets are ineffective in
cushioning the poor against price fluctuations and that the cash
transfers measure implemented in 2012 has been inadequate and
underfunded. Iran’s 2010 subsidy reform and the adoption of universal
cash programmes was applauded by the IMF, but resulted in a slowdown
in economic activity, raised the inflation rate, and undermined
political support for such a strategy.

While subsidy reform in the Arab region may be seen as a step with
macroeconomic benefits, the determinants of the weak economic
performance of Arab countries are rooted in their political economy,
as much as the productive structures and go beyond the reach of the
IMF’s traditional austerity proposals. By calling for short- to
medium-term phasing out of energy subsidies, the IMF is targeting the
symptoms rather than the causes of the deep-rooted social and
economic injustices that sparked the region’s uprisings. Reversing
the underperformance of Arab countries will not be achieved without
profound changes in the productive structures of their economies – by
moving towards developmental states and building effective
institutions that make economic and social development a priority
objective.

Arab authorities must rethink their policy choices towards promoting
manufacturing and the acquisition of industrial capabilities. This
would generate decent employment, stimulate productivity and create
linkages with other sectors, thereby easing the need for subsidies in
a region highly dependent on them. Still, any choice of reform
strategy, which should be a medium- to long-term endeavour, must be
accompanied by an inclusive rights-based protection framework. It
must also depend on the specific country context, taking into
consideration the extent of existing levels of poverty within the
reforming country, the status of social and economic development of
the country, and its administrative capacity to implement social
protection measures. Taking these factors into consideration,
appropriate reforms to energy subsidies should be developed, in
consultation with stakeholders including civil society organisations,
which are more gradual and legitimate. As a result a more efficient
and progressive fiscal framework, protecting vulnerable poorer
people, can emerge.

Hassan Sherry, Arab NGO Network for Development, Lebanon

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TOPIC:CONDITIONALITY
Analysis

6. IMF loans and conditions increasing

IMF borrowers concerned about IMF-sanctioned reforms
Bangladesh forced to sustain higher VAT rate despite “stifling
growth”
Serbia announces precautionary agreement with major job losses, cuts,
privatisation
Kenya commits to precautionary access to IMF funds as Ghana awaits
new loan approval

The number of IMF loans and agreements continues to increase despite
IMF managing director Christine Lagarde remarking in April 2014 that
“structural adjustment was before my time” (see Observer Autumn
2014). The IMF persists in advocating familiar reforms focused on the
increased use of indirect taxes, public sector layoffs and reductions
in subsidies to publicly-backed companies. There has also been an
increase in the use of precautionary agreements, whereby states agree
to an IMF-monitored programme of reforms, or conditionalities, in
exchange for the availability of funds. These funds are not
necessarily drawn unless the country faces further financial
difficulty.

Bangladesh loan suspended to force VAT reforms
----------------------------------------------
In November 2014, the IMF suspended disbursement of a $140 million
payment for its $954 million Extended Credit Facility (ECF) to
Bangladesh. According to media reports, the IMF had made its
disbursement conditional upon the government announcing a new value
added taxation (VAT) law within an explicit timeframe, which would
commit the government to maintaining a 15 per cent rate while
reducing exemptions.
Government ministers resisted the IMF’s recommendation and
established a committee to examine the VAT question, which advocated
reduced VAT rates and more, not less, exemptions. It warned that the
IMF-recommended higher rate would stifle small businesses and growth,
while penalising domestic producers against international
competitors.

Nevertheless, the government later accepted the IMF’s requirement for
a uniform 15 per cent VAT level. Finance minister Abul Muhith
confirmed in January that “we are not going to reduce the existing
VAT rate. IMF feared that the rate would be cut. They set [a]
condition not to reduce it for releasing two tranches of ECF”. VAT
had originally been introduced to Bangladesh in 1991 under an IMF-
and World Bank-supported liberalisation programme.

Precautionary loans in Serbia, Kenya
-------------------------------------
In late December 2014 Serbia’s parliament passed a budget designed to
secure a precautionary loan agreement with the IMF, targeting a
reduction in the budget deficit of between €1.3 and €1.4 billion
($1.5 – $1.6 billion). Finance minister Dusan Vujovic told parliament
that the three-year loan agreement worth €1.3 billion “will not be
drawn, but is there just in case”. In May 2014 Serbia suffered floods
which caused damage estimated at €1.5 billion, larger than the total
value of its loan agreement with the Fund.

According to reports from news agency Reuters, apart from privatising
a number of state-held entities, the agreement will entail cutting up
to 27,000 jobs in the public sector, in order to make savings of
€600-650 million. The government has additionally committed to cut
most existing financial support to publicly-backed companies. Economy
minister Zeljko Sertic said in January that “under the IMF deal, half
of privatisation revenues can be directly invested in important
infrastructure projects … while the rest can be used for the
repayment of expensive loans”, but warned that there is “little hope
for revenues from sales of such companies”.

The IMF will discuss approval of the loan agreement with Serbia in
February. The IMF’s resident representative in Belgrade welcomed the
budget decision, saying that “the adopted budget is in keeping with
the agreement reached by the Serbian government and IMF in November
concerning the economic programme that could be backed by a 36-month
stand-by precautionary arrangement”.

Despite having only received the final instalment of a $750 million
loan package in December 2013, in November 2014 Kenya also agreed a
precautionary loan with the IMF. A Fund press release stated that
board agreement will be sought for a stand-by arrangement and stand-
by credit facility in late January.
The IMF Kenya representative, Armando Morales, said in November that
“about 70 per cent of the funds will be provided on non-concessional
terms”. The credit facility will initially be available for one year,
with provision for extension. Despite optimism surrounding
significant Chinese infrastructure investments and the benefit of
recent lower oil prices, Kenya’s recourse to the Fund appears to
vindicate concerns expressed last year regarding economic
vulnerability in a number of sub-Saharan Africa states (see Observer
Autumn 2014).

New lending to Ghana
--------------------
This vulnerability is also reflected in a long-awaited announcement
from Ghana that it too is expecting approval of an IMF agreement (see
Observer Autumn 2014). In January, deputy finance minister Cassel Ato
Forson, said “we’ve reached an agreement as long as the policy
objective is concerned; we’ve reached an agreement as long as
memorandum of economic and financial policy is concerned. The IMF is
only working with us to finalise [an agreement] and go to the board
next month”.

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TOPIC: FINANCE
News

7. Eye on the prize: the Greek debt sustainability question

Abstract
Despite heated debates about the consequences of Syriza’s win in
Greece and the IMF's stance on debt reduction, the question of debt
sustainability remains central to the country’s economic future.

Summary
- Post-election question of debt sustainability remains central to
Greece’s economic future
- IMF unwilling to consider debt forgiveness despite its historic
concerns over Greek debt
- In the wake of an election that has brought to power a government
that demands debt forgiveness, the question of the sustainability of
Greece’s debt remains central. This comes after five years of lending
from the Troika (the International Monetary Fund, the European Union
and the European Central Bank), amounting to €245 billion, to which
the IMF has contributed €48 billion.

Despite the Troika’s adjustment programme (see Bulletin Feb 2014),
the country’s debt to GDP ratio rose from 129 per cent in 2009 to 170
per cent in advance of the 2015 elections.

IMF executive directors have questioned the sustainability of the
IMF’s programme since its inception in 2010. In leaked minutes from
the May 2010 IMF board meeting in advance of the approval of its
first programme, the Brazil executive director Paulo Nogueira Batista
noted that “[t]he risks of the program are immense … Greece … will
have to undergo a wrenching adjustment …”

In June 2013 the IMF Forth Review of Greece underscored that debt
relief may be required “to keep debt on the programmed path”. The
need for debt relief has long been a source of tension among the
Troika partners (see Observer Autumn 2013). The IMF’s most recent
review, in June 2014, again raised the potential need for European
partners to agree a degree of debt relief. The Fund announced end
December 2014 that it would not proceed with Greece’s latest review
until after a new government is formed, delaying any decision on debt
relief.

The IMF’s programme target of a debt to GDP ratio of 124 per cent by
2020 implies a relatively small decrease of 5.7 per cent from the
country’s 2009 debt burden and would require annual growth in the
region of four per cent. Questions about the growth projections and
the sustainability of Greece’s debt were brought to light by the 2013
admission by the IMF of its mistakes in Greece (see Update 86), and
the IMF’s Independent Evaluation Office (IEO) February 2014 report on
IMF forecasts of medium-term growth. Writing in the New York Times in
late January, Nobel laureate economist Paul Krugman criticised the
Troika’s “wildly optimistic projections” and noted that the IMF had
“grossly underestimated the damage austerity would do”.

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TOPIC: PRIVATE SECTOR
News

8. IFC ignores concerns about investments in financial intermediaries

Abstract
IFC disagrees with concerns raised by CAO about its capacity to
assess whether its investments through financial intermediaries have
a positive development impact.

Summary
- IFC disagrees with CAO that it lacks capacity to determine impact
of its investments in financial intermediaries
- US passes bill supporting IFC disclosure of beneficial ownership of
financial intermediaries

In November 2014 the International Finance Corporation (IFC), the
World Bank’s private sector arm, released its official response to
the Compliance Advisor Ombudsman’s (CAO) 2014 monitoring report of
its 2013 audit of IFC investments through financial intermediaries
(FIs, see Bulletin Nov 2014). The IFC’s response focused on the
report’s positive findings while “differing” with the CAO’s, the
IFC’s accountability mechanism, assessment of the “adequacy” of the
IFC’s approach to its investments in financial intermediaries.

The CAO report acknowledged positive steps taken by the IFC but
questioned the development impact of its investments, concluding that
the “IFC has no quantitative or qualitative basis on which to assert
that its financial intermediation investments achieve … outcomes,
which are … central to IFC’s Sustainability Framework.”

In response to the report the IFC stressed that it “invests in FIs as
the most effective way of achieving the [World Bank Group’s] twin
goals of ending extreme poverty and boosting shared prosperity, and
not as an end in itself”.  While not responding specifically to the
IFC, in a letter submitted to World Bank Group president Jim Yong Kim
in December 2014 (see Article 10), 28 UN rights experts stressed that
“the pursuit of [the twin] goals does not automatically ensure that
the resulting programs and projects will promote and respect human
rights.”


US demands increased transparency
---------------------------------
In December 2014 the US Congress passed the 2015 Omnibus
Appropriations Act, calling on US executive directors of the IFC and
other international financial institutions to “seek to require” that
those institutions publish the identities of “beneficial owners” of
corporations or limited liability companies that receive public
funds. This supports a long-standing demand by civil society for
increased transparency about the IFC’s financing of offshore-
structured investments.  Speaking to the Environmental News Service
in January, Stephanie Fried of US-based NGO ‘Ulu Foundation noted
that “[b]y insisting on the publication of the names of … owners of
offshore funds supported by the IFC … Congress is taking important
steps to lift the veil of secrecy that has enabled international
criminal activity to flourish”.

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TOPIC: IFI GOVERNANCE
Background

9. Guide to the Independent Evaluation Office

Abstract/summary
Understanding the Independent Evaluation Office of the IMF, including
how it works and how civil society can input into its evaluations.

The Independent Evaluation Office (IEO) of the IMF was established in
2001 to “conduct research and evaluations on issues of relevance to
the mandate of the fund”, and to be “independent of IMF management
and staff and to operate at arm’s length from the board.” The IEO’s
establishment followed many years of board-level discussions and
advocacy by civil society for an independent evaluation body to
increase the transparency and accountability of the Fund. IEO
evaluations have had a significant impact on Fund policy and upon
perceptions of its role. Significant studies include the evaluations
of the IMF's responses to the Argentina crisis of the early 2000s,
and more recently its evaluation “International reserves: IMF
concerns and country perspectives”. The IEO usually publishes two
evaluations per year. To date it has produced 24 evaluations, most
recently in November with “IMF Response to the Financial and Economic
Crisis”. The IEO reports to the IMF’s executive board, rather than to
Fund management.

Structure and staffing
----------------------
The IEO currently employs 11 staff, the majority of whom are required
to come from outside the Fund. The current director is Moises
Schwartz, a macroeconomist who previously served as the director of
the National Commission for Retirement Savings in Mexico and as head
of research at Banco de Mexico. The director is appointed by the IMF
executive board for a non-renewable period of six years. The Director
is not subsequently eligible for appointment to the Fund staff. His
responsibilities include the selection of IEO personnel and the
preparation of the budget. The budget of the IEO amounts to 0.5% of
the IMF’s budget and is hence significantly lower than the budget of
equivalent organizations in the World Bank Group (The budget of the
Independent Evaluation Group in the World Bank amounts to 1.2% of the
Bank’s budget).
Evaluation process

The evaluation cycle is composed of eight stages: consultation on the
work programme, preparation of an issues paper, research, preparation
of the evaluation report, board discussion of the report, management
implementation plan, monitoring of the implementation by the board
and post-evaluation activities.

In the first two stages involvement of country authorities, executive
directors and IMF management, staff and external stakeholders is
actively sought: both in deciding upon topics for future reports, as
well as in commenting upon the issues paper. Once the evaluation
topics are selected, research is conducted using IMF documents and
surveys, interviews and focus groups. In stage three, the draft
version of the report is circulated among IMF staff for factual
corrections prior to publication.

Publication is followed by three further steps. Following discussion
by the board, a Management Implementation Plan is prepared by IMF
staff and management (in place since 2006), which states the
recommendations to be followed. Finally, the annual Periodic
Monitoring Report (PMR) assesses the extent to which the report’s
recommendations have been adopted. The PMR is conducted solely by
IMF’s management and only assesses the implementation of
recommendations from the IEO’s evaluation that the board had
accepted. Often the Periodic Monitoring Reports cover several
evaluations.


Accountability of the IEO
-------------------------
A regular external evaluation is required by the IEO’s Terms of
Reference. The first took place in 2005 with the Lissakers report
conducted by Karin Lissakers, former U.S. Executive Director to the
IMF. Key findings included questions regarding the IEO’s independence
from the Fund. It recommended different measures to enhance the IEO’s
effectiveness, such as the introduction of the MIPs, PMRs and
measures to make IEO’s staff more independent of the Fund. Some of
the suggested measures, such as the MIPs and the PMRs, have been
incorporated in the evaluation cycle.

A second external evaluation was chaired by Jose Antonio Ocampo, of
Columbia University and former minister of finance of Colombia, in
2013. The evaluation found that though the IEO had positively
contributed to the IMF’s external credibility the implementation
process for recommendations derived from evaluations did “not work
well”. It suggested the IEO drop the mandate of “promoting greater
understanding of the work of the Fund” as well as an increase to the
IEO’s budget. Following the Ocampo report the IEO begun producing re-
evaluations of already published evaluations. These are used to
assess the validity of past evaluations and the extent to which the
recommendations remain valid. So far four of these updates have been
published.


IEO consultation
----------------
Civil society and other stakeholders can provide input to IEO
evaluations in three ways. The IEO invites consultation on the
subjects for evaluation via its publication of proposed topics for
evaluation in the medium-term. Consultation also takes place on the
draft issues paper prior to research commencing for an individual
evaluation. The regular external evaluations of the IEO, which now
occur every five years, also provide stakeholders the chance to
comment on the functioning and effectiveness of the IEO itself.

=====================================================================

TOPIC: IFI GOVERNANCE
News

10. Out with the new, in with the old? World Bank restructure reveals
“colonial mindset”

Abstract
Criticism of the latest elements of World Bank's restructure mounts
from staff and the media, undermining president Kim’s leadership.

Summary
- World Bank to recruit 290 technical staff, together with $20
million for “country engagement”, in contrast with earlier
announcement of 500 job cuts
- Internal and external criticism of the Bank’s restructure mounts

The World Bank has embarked on a staffing reorganisation to the
displeasure of many of its employees. The changes follow Bank
president Jim Yong Kim’s 2013-2014 restructure of the Bank into 14
global practices (GPs) and five cross-cutting areas and have added
ammunition to widespread staff discontent over the fallout from Kim’s
strategy (see Bulletin Nov 2014, May 2014).

In October 2014 a recruitment freeze was announced, accompanied by
$400 million administrative cuts, requiring 500 operational job
losses over three years. The first round of staff departures, from
‘back office’ functions, started late January, according to Paul
Cadario, retired Bank senior manager, now at the University of
Toronto.

Following the announced staffing cuts, World Bank managing director
Sri Mulyani Indrawati revealed in a leaked October 2014 email that
the Bank will recruit 290 technical staff and allocate $20 million
“to increase resources for country engagement”. In an anonymous
October 2014 email to news site Devex, one employee said Indrawati’s
job announcement showed “a complete lack of professionalism and
coherence”, viewing the new jobs announcement as “a reaction to staff
complaints regarding the institution’s hiring freeze”.

Cadario commented to Devex in October that the amount isn’t “very
much” when spread across the Bank’s new GPs and cross-cutting areas.
He said it remained to be seen “who gets [the $20 million funding]
and how long it will take to get to the hands of people doing the
work”.


“Washington will decide what your problems are”
-----------------------------------------------

Kim insisted in an October 2014 press release that his reforms will
enable the Bank to “be the best in the world at collecting and
sharing development knowledge for the benefit of all our clients”. To
this end, the Bank launched a new website in September – ‘the
president’s delivery unit’ – to “track progress on 12 targets aimed
at increasing the Bank Group’s development impact”. However, in
November 2014 the Financial Times concluded that “the result [of the
restructure] so far is more centralisation,” and that the Bank risked
“sliding into irrelevance”. Indian newspaper, the Economic Times
quoted a Bank country expert in early December as saying: “Earlier,
our programmes came from the bottom up and channelled to Washington.
It’s been flipped over. Now, Washington will decide what your
problems are. It is a colonial mindset.”

Commentators have questioned whether Kim can achieve his vision given
the decline in the Bank’s income and therefore lending capacity
relative to newer investors, such as China. Nancy Birdsall of US
think tank Centre for Global Development wrote in a November blog of
“the growing gap between what the world needs from the Bank and what
the Bank has the remit to do.”

=====================================================================
TOPIC: RIGHTS
News

11. UN experts critique World Bank draft safeguards

Abstract
UN experts have questioned the World Bank’s draft safeguards’ lack of
references to human rights, meanwhile the consultation process
continues to raise concerns by NGOs.

Summary
- UN experts raise concerns about Bank’s draft safeguards, weak human
rights protection
- US to vote against weak safeguards, according to new legislation
- CSO letter highlights weak consultation process
- Tanzania organisations question weak policies for indigenous
peoples

In a December 2014 letter to the World Bank’s president Jim Yong Kim,
28 UN rights experts raised “a number of concerns” about the Bank’s
proposed new draft social and environmental framework. The draft,
which aims to update the existing safeguards framework, is currently
under consultation (see Bulletin Nov 2014, Observer Autumn 2014). The
experts particularly criticised the Bank’s approach to human rights,
calling it “a race to the bottom”. They noted that the draft
framework “seems to go out of its way to avoid any meaningful
references to human rights and international human rights law”
despite the fact that “human rights are … [a] legal obligation” for
the Bank.

Earlier, in November 2014, Philip Alston, one of the letter’s
signatories and UN special rapporteur on extreme poverty and human
rights, wrote an article on human rights titled “two words that scare
the World Bank”, in which he noted: “Today, every country, and thus
every Bank member state, has ratified human rights treaties imposing
binding legal obligations to respect rights. … Even most large
corporations have human rights policies that put the Bank to shame.”

The US 2015 Omnibus Appropriations Act was passed by Congress in
December 2014 (see Article 7). In a move welcomed by civil society
organisations, the Act included an instruction for the US “to vote
against any loan, grant, policy or strategy if [the Bank] has adopted
and is implementing any social or environmental safeguard … that
provides less protection than World Bank safeguards in effect on
September 30, 2014”.

Meanwhile, the ongoing consultation process on the safeguards
framework continues to provoke controversy. A November letter,
coordinated by NGO coalition Bank on Human Rights and signed by 50
NGOs, listed several obstacles to participation, including that in
the majority of consultations participants had been “hand-picked …
with no transparency as to how invitation lists are compiled”.
Following a further extension, the consultation period has been
confirmed to end on 1 March. A revised draft framework is expected to
be released by the Bank in mid 2015.

=====================================================================
TOPIC: ENVIRONMENT
Analysis

12. World Bank pricing carbon: real solution to climate change?

Abstract
World Bank continues to promote putting a price on carbon as a key
policy to tackle climate change while critics say it is just a new
way of promoting failed carbon markets.

Summary
- World Bank continues to promote putting a price on carbon as a key
policy to tackle climate change
- Bank’s carbon pricing definition includes carbon markets and carbon
taxes
- Critics say carbon pricing is new way of promoting failed carbon
markets
- Farmers in Uganda claim they have been evicted from IFC-financed
forest plantations

The World Bank continues to promote putting a price on carbon as a
key policy to tackle climate change. To coincide with the United
Nations (UN) climate summit in September 2014 the Bank played a
leading role in coordinating a nonbinding statement on pricing carbon
signed by 74 countries, 23 subnational jurisdictions and over 1,000
businesses. According to the Bank this covers around half of global
greenhouse gas emissions.

The Bank followed up on this work by effectively calling for the
inclusion of carbon pricing in the draft negotiating text at the most
recent round of UN climate change talks held in December in Lima,
Peru. The draft text contains a range of options, with one describing
carbon pricing as “a key approach for cost-effectiveness of the cuts
in global greenhouse gas emissions”. One of the Bank’s key objectives
this year will be to ensure this language on pricing carbon stays in
the negotiation texts so that it is included in the final agreement
expected to be signed by the world’s governments in Paris in December
(see Observer Spring 2014).


Defining ‘pricing carbon’
------------------------

The Bank’s website explains that there are two main types of carbon
pricing. First, cap-and-trade systems which cap the “total level of
greenhouse gas emissions but then allow those industries with low
emissions to sell their extra allowances to larger emitters”. As
industries buy and sell allowances between each other a market (an
emissions trading scheme, ETS) is created which “establishes a market
price for greenhouse gas emissions”. Second, a carbon tax “directly
sets a price on carbon by defining a tax rate on greenhouse gas
emissions”. The Bank states other ways to price carbon include fuel
taxes, removing fossil fuel subsidies and making payments based on
emissions reductions (carbon offsets). The Bank points out that
putting a price on carbon is not new as it is already happening in
around 40 countries.

However, there is a debate about whether carbon markets or carbon
taxes are more effective at reducing emissions because they operate
differently (although some argue they are not necessarily mutually
exclusive). This centres on which stakeholders will be required to
reduce their pollution, and also the estimated impact the policy will
have on reducing aggregate emissions. Under a cap-and-trade system a
maximum cap is applied, whereas with carbon taxes there is only
certainty about the costs of pollution, meaning there might not be
enough emissions reductions.


Deliberate ambiguity?
---------------------

The Bank’s messaging on carbon pricing is becoming increasingly
opaque because it references a wide range of policies under one
banner. In a speech prior to the Lima climate summit Bank president
Jim Yong Kim said “effective prices on carbon can be discovered by
taxes, market mechanisms or regulation”.

In practice the Bank has placed a much bigger emphasis on carbon
markets and this is no surprise given the Bank’s long track record of
backing nascent carbon markets (see Observer Spring 2014). However,
it is now increasingly mentioning carbon taxes in its communications
work on carbon pricing. In his speech ahead of the Lima climate talks
Kim repeatedly mentioned carbon taxes, saying that “carbon pricing
can raise revenues and these added resources can be used to generate
more economic and social benefits. We can do this by, for example,
moving from ‘taxing the goods’ to ‘taxing the bads’ ”.
Pablo Solón of Thailand-based NGO Focus on the Global South argued in
a September 2014 article that the Bank is deliberately fudging what
carbon pricing means “to promote carbon markets in a new, clever way:
by combining candy and poison”. He criticised carbon markets because
instead of requiring reductions in pollution they “give stakeholders
permits to pollute”.

A range of civil society groups, including Carbon Trade Watch, have
repeatedly criticised carbon markets because they do not reduce
emissions at their source, thus allowing the countries and companies
that have caused climate change to transfer their historic
responsibility to others (see Observer Spring 2014, Update 85).
During the Lima climate change talks a civil society statement noted
that the negotiations had left the possibility open “for the further
expansion of the failed experiment of carbon markets”. These include
potential “carbon credits from forests and soil, which undermines
communities’ land rights and would be devastating to farmers and
forest communities across the world”.

=====================================================================

13. Recommended resources on 2014

Abstract
The best papers and books on the World Bank and IMF from 2014.

NO SUMMARY

Papers
------

Follow the money: The World Bank Group and the use of financial
intermediaries; Bretton Woods Project
Report reveals that the World Bank Group is channelling crucial
development resources to banks instead of directly investing in pro-
poor projects.
tinyurl.com/Follow-the-money-BWP

Multilateral Development Banks’ unburnable carbon; Bretton Woods
Project
Briefing on MDBs’ fossil fuel investments and exposure to the ‘carbon
bubble’.
tinyurl.com/Unburnable-Carbon-BWP

A dangerous diversion: Will the IFC’s flagship health PPP bankrupt
Lesotho’s Ministry of Health?; Oxfam
Highlights the damaging impacts of an IFC-supported Lesotho health
public-private partnership scheme.
tinyurl.com/Dangerous-Diversion

A private affair: Shining a light on the shadowy institutions giving
public support to private companies and taking over the development
agenda; Eurodad
Analyses development financial institutions and the lack of
involvement of recipient countries in development policies.
tinyurl.com/Eurodad

Greece’s health crisis: From austerity to denialism; Alexander
Kentikelenis et. al
Illustrates the aggravating effects of austerity measures on Greece’s
health system.
tinyurl.com/Greece-Health-Austerity

The great land heist; ActionAid
Shows how land grabs are facilitated by both ‘host’ and ‘home’
country governments and analyses the devastating consequences for
smallholders.
tinyurl.com/Action-Aid-Land

“The more things change…” The World Bank, Tata and enduring abuses on
India’s tea plantations; Columbia Law School
Highlights abusive conditions on tea plantations part-owned by the
IFC and Indian Tata corporation.
tinyurl.com/India-Tea-Plantations

“There are no investigations here”: Impunity for killings and other
abuses in Bajo Aguán, Honduras; Human Rights Watch
Examines a series of homicides and abductions in Honduras, as well as
human rights violations by soldiers and police.
tinyurl.com/HRW-Honduras

At the mercy of the government: Violation of the right to an
effective remedy in Badia East, Lagos State, Nigeria; Amnesty
International
Report on the communities of Badia East affected by Nigeria
government demolitions, part of a Bank-funded project violating
international human rights laws.
tinyurl.com/Amnesty-Nigeria

Books
-----
Forgotten foundations of Bretton Woods: International development and
the making of the postwar order, Eric Helleiner
Challenges the assumptions that architects of Bretton Woods
institutions devoted little attention to international development
issues or the concerns of poorer countries. Cornell University Press,
ISBN-13 978-0-8014-5275-8

The battle of Bretton Woods: John Maynard Keynes, Harry Dexter White,
and the making of a new world order, Benn Steil
Describes the Bretton Woods negotiations and shows how Bretton Woods
was part of an ambitious geopolitical agenda of the US. Brilliance
Audio, ISBN: 978-1491531006

ELECTRONIC RESOURCES
--------------------
www.ourlandourbusiness.org
Campaign exposing links between the World Bank’s Doing Business
rankings and land grabs.
www.safeguardcomments.org
Civil society monitoring on the World Bank safeguards review.

=====================================================================

TOPIC: Humour

14. Bankspeak of the year 2014

Abstract
Bankspeak of the year 2014 celebrates some of the most ridiculous
public remarks of Fund and Bank staff.


Every year the Bretton Woods Project highlights some of the most
ridiculous remarks of Fund and Bank staff. This year we recognise
Rachel Kyte’s mission to tackle climate change and Christine
Lagarde’s ‘more-is-less’ approach to speech-making.

In a Financial Times feature profile in January, Rachel Kyte, the
World Bank Group vice president and special envoy for climate change,
just happened to mention in passing that Bank President Jim Kim “has
asked me to take on climate change”. This was as she prepared for
“another gruelling trip across the globe, culminating in back-to-back
meetings in Davos”. Meanwhile, in a video in March on the importance
of limiting temperature increases Kyte revealed that she “grew up in
a warm family” and that the number she thought about all of the time
was the number 2, which is a “small number with very big problems”.
She managed to keep a straight face ending the video: “the most
powerful part of the number 2 is that it’s about us, it’s about me
and you”.

Another winner is IMF managing director, Christine Lagarde, who once
again demonstrated her infamous gift for local idioms. At a London
speech about empowerment she found solutions to capacity-building in
the most obvious of places – Charlotte Brontë – quoting: “Liberty
lends us her wings, and Hope guides us by her star”. Let’s hope that
this guiding star will help Lagarde fly the Fund to some better ideas
in 2015.

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