Government urged to withhold World Bank funding

By staff writers
December 13, 2007

The World Bank risks doing more harm than good, if it is allowed to continue attaching harmful economic conditions to its development loans, international development agency Christian Aid has warned.

The agency is urging the UK government to press hard for World Bank reforms today, (Dec 13) as it takes part in a high-level donors meeting in Berlin to discuss the next round of dispersals for 2008-2011.

At issue is the Bank’s practice of requiring countries to modify their economic policies in exchange for loans and debt relief. These changes often benefit European and US investors much more than the people living in developing countries, say campaigners.

Christian Aid is calling on the UK government to withhold funds until the Bank stops demanding that recipient countries implement economic reforms such as privatisation and trade liberalisation.

Following widespread criticism, including from the UK Government, which threatened to withhold £50m in 2006, the Bank recently established five Good Practice Principles, which purportedly did away with the practice of imposing economic conditions, known as “conditionality”. But the European Network on Debt and Development, EURODAD, has found that more than two thirds of IDA loans and grants (71%) remain conditional on economic reforms that can adversely affect the poor.

Olivia McDonald, Christian Aid’s World Bank expert, said: “European governments should not be taken in by the Bank’s assurances that the imposition of harmful economic conditions has stopped. Using the Bank’s own figures we’ve found that the evidence quite clearly states the opposite. And stories from poor communities around the world demonstrate the continued impoverishment that dictating inappropriate economic policies to poor countries causes.”

The Moderator of the Church of Scotland, the Right Rev Sheilagh Kesting, and the Primus of the Scottish Episcopal Church, Bishop Idris Jones have also written to the Development Secretary, Douglas Alexander, in support of Christian Aid’s call for withholding funding until the World Bank stops imposing economic conditions.

Christian Aid researchers recently travelled to Nicaragua, which was forced to privatise its electricity service in return for World Bank assistance.

In Nicaragua, electricity privatisation was rushed through in 2000, with a promise to increase coverage and lower tariffs. Seven years later, the small gains in coverage have been overshadowed by bills escalating by up to 400 per cent and daily blackouts lasting up to seven hours in many neighbourhoods. It is also heavily reliant on imported oil-based electricity generation, which damages the environment.

The emphasis that the World Bank places on using fossil fuels to power development is also of concern given the impact that climate change is already having on poor countries. The European Parliament has called for an end to public European support for fossil fuel projects, and campaigners want governments to follow suit by withholding funding.

Paul Brannen, Christian Aid campaigns manager, said: "European governments have a final opportunity in Berlin to send a strong signal to the World Bank that they need to change the way that they do business and stop forcing an outdated economic model on developing countries. Without the threat that funding will be blocked, the Bank will be able to pursue policies that undermine the fight against poverty and lead to further environmental devastation."

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