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BRETTON WOODS UPDATE
A bi-monthly digest of information and action on the World Bank & IMF
Number 78, November/December 2011
Published by BRETTON WOODS PROJECT
Working with NGOs and researchers to monitor the World Bank and IMF
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1. World Bank manoeuvres to influence climate finance debates
2. Beyond repair? Bank lobbies for carbon markets
3. New reports question Bank’s coal investments
4. Comment - Nepal climate loans: an injustice
5. Bank’s gender WDR: too little, too late?
6 IMF plays "second fiddle" as governments fall in the eurozone
7. Inside the institutions: country classifications
8. Capital controls: IMF gradual change of heart continues?
9. IMF’s focus on austerity proved "wrong, wrong, wrong", say
critics
10. Guest analysis - Despite evidence, Bank still promoting water
privatisation
11. Little currency for global money?
12. IFIs admit failure to put jobs at the centre
13. New World Bank corporate scorecard: adding value?
14. IFC accused of standards breach over Ugandan land grab
15. Analysis in conflict WDR criticised
16. DFID’s multilateral funding questioned
17. World Bank poverty findings challenged
18. Bank’s procurement rules "rigid"
19. Inflation "obsession" hurting Kenyan growth
20. IMF’s "trusted advisor" role to be scrutinised
21. IFI’s macroeconomic policy "anti-growth"
22. IMF still divided on gold sales windfall
===================================================================
1. World Bank manoeuvres to influence climate finance debates
---------------------------------------------------------------------
As the next round of global climate negotiations approaches, the
World Bank advocates the use of private sector finance for climate
change adaptation and mitigation, and pushes multilateral development
banks as delivery mechanisms.
An early October report on mobilising climate finance was coordinated
and produced for the G20 by the World Bank in the run up to the
United Nations Framework Convention on Climate Change (UNFCCC)
negotiations, which begin in late November in Durban, South Africa.
The report, Mobilising climate finance, highlights the importance of
eliminating fossil-fuel subsidies and of implementing a carbon tax on
aviation and shipping, which have long been demanded by civil society
groups. It also advocates controversial measures to boost ailing
carbon markets (see article 2).
It argues that meeting the UNFCCC-agreed goal of mobilising $100
billion a year of climate finance will not be achievable through
public budgetary allocations. It states that "the large financial
flows required for climate stabilisation and adaptation will, in the
long run, be mainly private in composition."
This is in sharp contrast to a late August UN note commenting on a
draft of the paper. In a recommendation that went unheeded, it says
that "the G20 paper can benefit from giving due weight to direct
budget contributions, as well as ... a financial transaction tax."
Enter private finance
---------------------
The reports’ discussion of public climate finance centres on its use
to leverage large amounts of private lending, with a whole section
part-authored by the Bank’s private sector arm, the International
Finance Corporation (IFC). It emphasises the role multilateral
development banks (MDBs) can play in this process and uses the
example of the Bank-housed Climate Investment Funds (CIFs) to
illustrate the potential for MDB-operated pooled financing
arrangements to leverage private finance. The IFC plays a prominent
role at the CIFs, implementing a range of private sector projects,
often through financial intermediaries (see Update 77, 76, 75).
However, a September 2011 report by Swiss NGO the Berne Declaration
argues that the leveraging potential of CIFs has been overestimated.
The report examines the Clean Technology Fund (CTF, one of the CIFs)
programme in Turkey. It finds that in the energy efficiency sector
the CTF largely achieved its official objectives of stimulating
private investment. However, it questions the impact on hydropower,
which "is already marketable and we have not found evidence that the
comparatively large portion of CTF money invested in hydropower has
had a positive spill-over effect and leveraged investment."
The Green Climate Fund
----------------------
The design document for the new Green Climate Fund (GCF) (see Update
77, 76, 75), put together by a transitional committee of 40
countries, will go to Durban for approval without all committee
members approving the final plan.The US refused to endorse the
document, citing concerns over many issues, including the proposal
that the GCF should have its own legal personality. Liane Schalatek,
of the German political foundation Heinrich Böll, notes that this
stance is based on "the implication that ultimately the status needed
could also be derived through an existing international entity like
the World Bank; a clear no-go from the developing country side".
The Bank has already been announced as interim trustee of the GCF,
but developing countries and civil society groups have been actively
resisting any expansion of this role. Laurence Graff, of the European
Commission, told the press in November that "the issue is indeed
whether the fund should be allowed to carry out its own projects
without resorting to the World Bank. That is still open (to
discussion)".
Many developing countries also raised concerns over the inclusion of
a proposal for the GCF to include a private sector facility. Several
developed countries in committee negotiations emphasised the
potential for the facility to leverage large amounts of private
finance. As Schalatek notes, this was "a bitter pill for most
developing countries to swallow", many of whom have maintained that
the GCF should be mainly financed through new and additional public
contributions from developed countries.
Civil society groups have also been warning of the dangers of a
facility premised on private finance. Lidy Nacpil of international
network Climate Justice Now! said in September that "the over-
emphasis on leveraging private investment could lead to a fund that
depends heavily on financial intermediaries. As demonstrated by the
IFC, the financial sector’s desire for less disclosure, less
liability, and less accountability for environmental and social
outcomes will pose a significant challenge for global efforts to
promote sustainable development and climate stabilisation."
G20 climate finance report, G20
tinyurl.com/g20report
Report on Turkish CTF, Berne Declaration
www.evb.ch/en/p19541.html
===================================================================
2. Beyond repair? Bank lobbies for carbon markets
---------------------------------------------------------------------
As the UN climate talks loom, the Bank is lobbying G20 countries to
resuscitate shrinking carbon markets through controversial measures,
including using public climate finance to stimulate demand and
creating markets for soil and forest carbon.
The Bank will use the United Nations Framework Convention on Climate
Change (UNFCCC) summit in Durban, South Africa, in late November to
launch the Carbon Initiative for Development fund. This aims to
provide up front finance for carbon-credit-generating projects in
least developed countries. The Bank is also expected to continue to
lobby for international agreements to support the viability of carbon
markets, which allow countries and companies to claim a reduction in
carbon emissions by purchasing credits generated by emissions
reductions from other sources.
The Kyoto Protocol, the only internationally binding agreement on
emissions reductions, is due to expire in 2012, and expectations are
low that another legally binding agreement will be reached in Durban.
This has raised fears over the future of the Clean Development
Mechanism (CDM), mandated by the Kyoto agreement, which allows
countries to reach their targets through carbon markets.
The launch of the new fund by the Bank, which already manages over
$2.7 billion in carbon funds and is a major facilitator of carbon
finance investments (see Update 74), is further evidence of its
efforts to prop up ailing carbon markets (see Update 77, 76).
International markets in CDM credits have severely contracted in the
last two years. Oscar Reyes of NGO Carbon Trade Watch, observes that:
"The World Bank is continuing to push for more carbon markets, which
have failed to reduce emissions and which displace responsibility for
emissions reductions towards developing countries. The Carbon
Initiative for Development explicitly acknowledges the failure of the
carbon market in poor countries, but this is inscribed in the offset
market’s economic DNA: investors find the economies of scale of heavy
industry and large dam projects in middle-income countries most
attractive, while most poor countries don’t pollute enough to be
interesting to the market."
The Bank-led climate finance report for the G20 (see article 1)
includes a section on carbon markets authored by the Bank. It admits
that "carbon offset markets face major challenges", but advocates a
series of measures that it insists could buttress carbon finance.
Controversially, this includes using publically provided climate
finance to buy carbon credits to stimulate demand. Responding to the
report in UK newspaper the Guardian, Murray Worthy of UK NGO World
Development Movement said "limited public finance must not be used to
prop up failed carbon markets. These markets only exist to pass the
burden of cutting emissions back on to poorer countries, which are
not responsible for causing climate change".
Creating new markets
--------------------
The report for the G20 also advocates that sectors currently
"bypassed by existing regimes" be eligible to produce carbon credits,
including soil carbon in agriculture (see Update 77) and Reducing
Emissions from Deforestation and Degradation (REDD+). Speaking in
September, Andrew Steer, the Bank’s special envoy on climate change,
said the summit is an opportunity for a new focus on agriculture. On
soil carbon he said: "You invest in things that are good for yields,
good for resilience and also sequester more carbon. You can have it
both ways if you get carbon back in soils."
A September report by ActionAid International critically examines the
Bank’s assumptions on soil carbon. It argues that although the Bank
wants soil carbon to be included in the CDM, "scientific uncertainty
about the quantification and verification of soil carbon, as well as
the non-permanence of sequestered carbon, put both the value of the
associated credits and the mitigation potential of soil carbon
markets in doubt." ActionAid also warns that it leaves small farmers
with traditional land rights vulnerable to land grabs (see article
14) by creating incentives for governments to reclaim land.
Additionally, the report claims restricting farming practices to
those that sequester carbon may actually reduce farmers’ ability to
adapt to climate change.
The negotiations in Durban will also focus on progress in
establishing international agreement on REDD+. The Bank’s G20 report
argues that agreements on carbon finance should take advantage of
"the large mitigation opportunities from REDD+ activities." The
UNFCCC has not yet taken an official position on market-based
financing for REDD+, although current Bank REDD programmes are
designing projects to produce carbon credits.
A September letter by an international coalition of NGOs warns that
the Bank’s Forest Carbon Partnership Facility (FCPF, see Update 76,
75, 72) is prematurely pushing ahead with its own Carbon Fund, which
will facilitate the sale of forest carbon credits to investors. The
letter, whose signatories include the Papua New Guinean Ecoforestry
Forum and Gabonese NGO Brainforest, argues that the FCPF "should be
wary of preparing countries for a market in forest carbon credits
which may not materialise." US NGO Bank Information Center also
warned in its October REDD newsletter that methodological work by the
Carbon Fund "may also end up leading or influencing the international
climate negotiations." The letter argues that social and
environmental safeguards, the rights of indigenous peoples, and the
participation of affected communities must be improved before the
Carbon Fund launches activities in participating countries.
ActionAid soil carbon report, ActionAid
www.actionaid.org/publications/fiddling-soil-carbon-markets-while-
africa-burns
===================================================================
3. New reports question Bank’s coal investments
---------------------------------------------------------------------
As the November climate talks in South Africa approach, the World
Bank continues to be overshadowed by past and prospective loans for
fossil-fuel power plants.
An October report by the Kosovar Institute for Policy Research and
Development (KIPRED) and US NGO Sierra Club has sharply criticised
the Bank’s cost projections for a proposed lignite-fired power plant
outside the Kosovan capital Pristina, which the Bank is considering
funding (see Update 77, 75). The Bank’s cost estimates are "clearly
out of date", the report charges. "It is reasonable to assume that
the cost of electricity under the proposed plan might be three times
higher." KIPRED’s Nezir Sinani said: "The proposed plant is supposed
to light up the Kosovan economy, but will actually be a huge burden.
Sold on bogus figures, it will harm citizens’ health and push up
their bills." The report also accuses the Bank of failing to consider
renewable alternatives, contravening its own Strategic Framework on
Development and Climate Change (see Update 77, 71).
The Bank’s energy strategy, meanwhile, is still in limbo (see Update
76, 75), after a Bank board sub-group split in April over its
proposed phase-out of coal lending to middle-income countries (MICs).
The Bank has not indicated any timetable for completion of the
strategy. But a delegation of Indian activists visited Washington in
September to lobby the Bank and IMF at their annual meetings, urging
them to follow through on the draft proposal. The activists represent
communities fighting a wave of coal-fired developments in India.
Long-term impacts of Bank coal funding in the Singrauli district of
northern India are the focus of a November report by UK NGO the
Bretton Woods Project, which documents "environmental squalor" and
"massive displacement of local people."
Figures released in October by US think tank the Brookings
Institution back up the proposed phase-out of Bank coal lending to
MICs, pointing out that the rate of return on coal-fired projects
means finance is readily available from the private sector.
Meanwhile, an October report by US consulting firm Climate Advisors
finds that coal funding "burdens recipient countries and the poor.
The World Bank should redirect its funding to cleaner generation
sources." In November, US-based NGO Oil Change International launched
an online "Shift the Subsidies" database, detailing energy sector
lending amongst multilateral development banks since 2008.
No fairy tale, Bretton Woods Project
brettonwoodsproject.org/singrauli
KIPRED report
tinyurl.com/kipredreport
The Brookings Institution report
tinyurl.com/brookingsbankcoal
Climate Advisors report
tinyurl.com/climateadvisorsreport
===================================================================
4. Comment - Nepal climate loans: an injustice
---------------------------------------------------------------------
by Keshab Thapa, Local Initiatives for Biodiversity, Research and
Development, Nepal
The Pilot Programme for Climate Resilience (PPCR), part of the World
Bank-housed Climate Investment Funds (CIFs), intends to help
integrate climate resilience in national development planning of
climate vulnerable countries. The PPCR offers recipient countries a
mix of grants and loans for climate adaptation projects.
Nepal, the world’s fourth most vulnerable country to climate change
according to the 2011 report of risk-analysis company Mapplecroft,
was one of the first countries to apply for PPCR resources. In June,
the subcommittee of the PPCR approved $50 million in grants and $36
million in loans to the Nepalese programme. Co-financing from other
multilateral development banks implementing the PPCR programme is yet
to be announced, but is likely to be heavily loan based.
It is obvious that developed countries must provide unconditional
financial support on adaptation to countries vulnerable to climate
change to build their resilience. The parties to the United Nations
Framework Convention on Climate Change (UNFCCC) have taken into
account the common but differentiated responsibilities and respective
capabilities of countries, and developed countries had committed
adaptation support to vulnerable countries. Building resilience of
vulnerable country communities through loans is against the
commitments made and principles agreed at the UNFCCC. It is simply an
injustice.
Taking loans for adaptation to climate change is a serious concern
for citizens of Nepal, who are advocating for climate justice, which
the government has also envisioned in its Climate Change Policy 2011.
It strictly does not comply with Nepal’s stance in international
forums and its own policy on climate change.
Nepal has submitted its National Adaptation Programme of Action
(NAPA) on climate change to the UNFCCC. The framework of NAPA
implementation requires 80 per cent of the funds of any adaptation
programme to flow directly to the community level. But the PPCR in
Nepal neither complies with NAPA priorities nor its implementation
framework. Currently the PPCR in Nepal, in not recognising NAPA,
violates the principle of country and community ownership.
The PPCR in Nepal has not received the support of civil society
organisations, who are actively engaged from community level to
national and international policy lobbying level. The process of
stakeholder consultation is not fair enough to maintain a transparent
engagement process. There has been a serious lack of involvement of
NGOs active at the community level on climate change, with very few
of these organisations consulted on the PPCR.
Furthermore, the PPCR proposes to lend money to private sector
companies, which will never achieve community resilience. Private
companies are often happy to use the loan money for their own
benefit, simply looking at the scheme of interest and repayment, but
they are often totally unaware of climate change, adaptation,
resilience, and the principle of equity and justice.
Already, Nepal has been categorised as a country at medium risk of
debt distress, and it is hard to predict where it will go with the
loan on adaptation. Offering and accepting loans will seriously
disregard the sovereign right of the people of vulnerable countries,
which is not recognised by the decisions of their so-called leaders,
who are much less aware than their people on this issue.
In the context of huge opposition to the PPCR, it will be hard to
achieve community resilience unless the loan component is resolved.
It is very important for the World Bank to resolve this to avoid
further controversy. The best way is to convert the loans into grants
and make them easily accessible to climate change vulnerable
countries. The developed nations pledging money to the CIFs and other
funds must agree to provide unconditional support on climate change
adaptation, save the lives of people whom they made vulnerable and
save the planet by controlling the temperature below the tipping
point. In order to achieve this, the parties in the Durban UN climate
meeting must cut loans out of any adaptation agreements.
kthapa@libird.org
=====================================================================
5. Bank’s gender WDR: too little, too late?
---------------------------------------------------------------------
The Bank’s flagship publication pushes gender equality on to the
Bank’s agenda, but critics express concern about its implementation
and unwillingness to consider gender a women’s rights issue.
The World Development Report (WDR) 2012: Gender Equality and
Development was released in September. It documents progress in
narrowing gender gaps in education, health and labour in the past 25
years and maintains the Bank’s past approach to gender as an economic
issue, which has been criticised for failing to treat gender under a
women’s rights framework (see Update 75, 74). However, the WDR
recognises that economic growth does not always lead to gender
equality. Female mortality, school enrolment and earnings are some of
the areas identified where gender gaps are still most significant.
Shahra Razavi, of the United Nations Research Institute for Social
Development, said in an October paper that the WDR was a "missed
opportunity". "By failing to engage seriously with the gender biases
of macroeconomic policy agendas" and "reducing social policy to a
narrow focus on conditional cash transfers", she argues, "the report
is unable to provide a credible and even-handed analysis of the
challenges that confront gender equality ... and appropriate policy
responses for creating more equal societies."
During the Bank’s September annual meetings, the ministerial level
Development Committee endorsed a paper detailing the implications of
the WDR for the World Bank Group. This paper lays out five directions
to capitalise on the WDR: informing country policy dialogue on gender
equality; enhancing country-level gender diagnostics; scaling up
lending for domestic priorities identified by WDR 2012; increasing
the availability of gender-relevant data and evidence; and leveraging
partnerships, global and country-level, to help implement priority
actions.
But Marina Durano, of the international feminist network Development
Alternatives with Women for a New Era, pointed out that it "does not
mention whether gender equality considerations will inform a
reformulation of Bank assessment tools used to determine lending
allocation, such as the Country Policy and Institutional Assessment
[CPIA, see Update 43], in order to ensure that Bank policies and
their macroeconomic policy advice support the gender equality
aspirations set out in the WDR". Moreover, Durano said the
implications paper does not explain how the Bank will work along
other institutions promoting gender equality, such as the UN Human
Rights Council.
The implications paper states that, in the last five years, the Bank
"allocated more than $65 billion ... to improve girls’ education,
women’s and mothers’ health, and women’s access to credit, land,
agricultural extension services, jobs and infrastructure services."
But Elizabeth Arend of US-based NGO Gender Action disputed the Bank’s
commitments to gender, noting that its "‘social development, gender
and social inclusion’ investments have actually decreased from $1.25
billion in 2007 to $952 million in 2010". A July report from UN Women
also criticised the Bank for dedicating only $7.3 million to gender
equality components in public administration, law and justice
projects between 2000 and 2010 - just 0.001 per cent of grants and
loans in this period.
tinyurl.com/2012WDR
tinyurl.com/unrisdpaper
=====================================================================
6. IMF plays "second fiddle" as governments fall in the eurozone
---------------------------------------------------------------------
As the eurozone debt crisis escalates and protests multiply, the IMF
increasingly appears side-lined. Italy’s calling in of the Fund for
"verification" of implementation of its EU-agreed austerity package
symbolises the limits of its influence and resources.
In September, former IMF chief economist Raghuram Rajan suggested
that "the IMF should start taking the lead in managing the crisis
rather than playing second fiddle." While the IMF participated in
many of the October negotiations and summits in Europe, it has always
bowed to the priorities of the political leaders of the eurozone’s
most powerful members Germany and France.
The end-October European deal asked Greece’s private sector creditors
to take a 50 per cent cut in the face value of their debt (see Update
77, 76, 75). Greece was required to deepen its privatisation
programme with a further €15 billion ($20 billion) of public asset
sales.
The IMF has still not indicated if it will participate in a second
loan package to Greece, even though the European Union (EU) has been
asking it to since July (see Update 77). Several media outlets
reported that IMF negotiators were pressing for private sector write-
offs of up to 60 per cent over fears that Greek debt will still be
unsustainably large. Echoing the results of negotiations in Ireland
last year - the IMF reportedly proposed a 66 per cent write off on
Irish unguaranteed bank bonds - the Fund was overruled.
The Greek Debt Audit Campaign was also unhappy about the deal,
saying: "The selective haircut, which leaves the illegal loans of the
troika untouched and leads the pension funds to catastrophe, shows
how necessary both cessation of payments and a democratic, worker-led
debt audit is."
Major protests have been ongoing in Greece throughout the autumn. The
early November proposal of a popular referendum on the terms of the
EU-IMF loan, which would have marked the first ever such test of an
IMF programme, was cancelled amid opposition from other European
countries. After the resulting collapse of the Greek government,
Elena Papadopoulou of the Athens-based Nicos Poulantzas Institute
said: "Despite the proclaimed enthusiasm, there is no realistic
reason to believe that the new coalition government - with the
participation of the extreme right - will follow anything other than
the socially destructive policies applied according to IMF recipes
with the agreement of the European elites."
IMF to survey, not lend to Italy
--------------------------------
Financial market actors pushed the interest rates Italy would pay on
new borrowing over 6 per cent before the early November G20 summit.
The IMF has insufficient resources to cover the €300 billion Italy is
estimated to need to refinance in 2012. Instead, just before being
forced to resign, Italian prime minister Silvio Berlusconi agreed
with EU leaders to deeper austerity policies and then "invite[d] the
IMF to carry out a public verification of its policy implementation
on a quarterly basis."
It is not clear whether the Fund’s monitoring of Italy will be
treated as technical assistance or bilateral surveillance. Either
way, civil society organisations in Italy were sceptical. Antonio
Tricarico of NGO CRBM said "calling in the IMF is like playing with
fire. While the Berlusconi era has ended, his legacy will still be
there through an IMF-European Central Bank-European Commission
adjustment programme."
Austerity policies seem to be undermining eurozone economic
prospects. In mid October the Portuguese government announced a new
batch of cuts and said that it would miss fiscal deficit targets in
its EU-IMF programme because of failure to hit growth forecasts (see
Update 77, 76, 75). While the mid October EU-IMF review of Ireland
pronounced the government on-track in terms of the fiscal deficit, in
early November the unemployment rate was still 14.4 per cent and the
government slashed the growth forecast for 2012 from 2.5 per cent to
1.6 per cent.
Too few resources
-----------------
Because the IMF would not have sufficient resources for a crisis in a
large country like Spain or Italy, IMF head Christine Lagarde hinted
in late September that it might need more money. Just one week later,
after the US treasury secretary vetoed the idea, Lagarde did a U-
turn, saying that the IMF had enough resources.
In October, China, Brazil, Russia and India said they would be
willing to provide additional resources through the IMF for loans to
Europe. In 2010, all these countries were willing to put more
resources into the IMF in exchange for greater voting rights, but
this was blocked by Europe (see Update 73). In mid October, Brazilian
president Dilma Rousseff reiterated that Brazil could put more money
into the Fund in exchange for more voting rights, while criticising
IMF conditionality: "we will never accept, as participants of the
IMF, that certain conditions that were imposed on us, be imposed on
other countries."
Debt sustainability frameworks reviewed
---------------------------------------
The IMF reviewed its methodology for assessing debt sustainability in
advanced and middle-income countries in late August, admitting that
its past analyses have been too optimistic. It confirmed the
complaints of critics (see Update 56) when it found that "GDP growth
forecasts showed a tendency to systematically exceed outcomes. This
phenomenon was particularly relevant in countries with an IMF-
supported programme." The IMF and the World Bank are also conducting
a review of debt sustainability analysis for low-income countries and
an initial paper is expected soon.
No to the 50% haircut, Greek Debt Audit Campaign
elegr.gr/details.php?id=258
Modernizing fiscal policy framework and public debt sustainability
analysis
www.imf.org/external/np/sec/pn/2011/pn11118.htm
===================================================================
7. Inside the institutions: country classifications
---------------------------------------------------------------------
A state’s relationship with the IFIs and the type of assistance it
receives is determined by its country classification. Some crucial
types of classifications are: the World Bank’s operational lending
categories; the Bank’s analytical categories used in the World
Development Report (WDR); the IMF’s operational and analytical
categories; the IFC’s frontier market category; the Bank’s fragile
state category; and the distinctions used by the Bank and IMF in
determining and reporting success in governance reforms.
The analytical classifications the Bank uses in its WDR are based on
gross national income (GNI) per capita. Updated every three years,
they currently are: low-income, $1,005 or less; lower-middle-income,
to $3,975; upper-middle-income, to $12,275; and high-income, more
than $12,275. These classifications are widely used, notably in
forming the basis of the Organisation for Economic Co-operation and
Development’s (OECD) definition of official developmental assistance.
The Bank’s operational lending categories are based on the same data
as the analytical classifications. The lending thresholds for the
fiscal year 2012 were: civil works preference, $1,005; International
Development Association (IDA) eligibility (operational), $1,175;
International Bank for Reconstruction and Development (IBRD)
graduation, $6,925. Civil works preference is the cut-off at which
the Bank demands international competition in procurement for Bank
assisted projects, and IBRD graduation marks the point where a state
graduates from the IBRD to donor-country status. Due to resource
constraints, the IDA operational cut-off of $1,175 is lower than the
historical eligibility ceiling based on $250 in 1960. IDA eligibility
also forms the basis of other important categories, such as the
Bank’s definition of a fragile state, the IFC’s definition of a
frontier market and eligibility to the IMF’s concessional lending
facility. The classifications do not consider the distribution of
wealth within countries, which explains how most of the world’s poor
live in countries that are classified as middle-income.
A ‘fragile state’ is a low-income country that has a harmonised
average Country Policy and Institutional Assessment (World Bank/Asian
Development Bank/African Development Bank) score of 3.2 or below, out
of 6 (see Update 63, 52, 43). This is contentious as the assessments
contains no measure of security and it means that countries that are
not low-income are precluded from definition as fragile. There is no
formal World Bank definition of conflict.
The crucial category for the International Finance Corporation (IFC),
the Bank’s private sector arm, is ‘frontier markets’, which forms the
first of its strategic Five Pillars. A ‘frontier market’ is an IDA
eligible country, a ‘fragile state’ (using the Bank’s definition), or
a ‘frontier region’ in a middle-income country. A ‘frontier region’
is primarily defined by the per capita income of the region with
adjustments for business risk issues in the country.
The IMF has its own analytical and operational classifications. The
analytical classifications are used in its World Economic Outlook
(WEO) report to categorise states as advanced or developing
economies. The IMF listed 34 advanced economies in its September 2011
WEO, compared to the Bank’s 70 high-income countries for the same
period. The key IMF operational classification is eligibility for the
Poverty Reduction and Growth Trust (PRGT), its concessional lending
trust fund. Countries are added to the PRGT-eligibility list if their
annual per capita GNI is below the IDA operational threshold, or if
they lack access to capital markets on a "durable and sustainable
basis".
Economic data used by the IMF is based on gross domestic product
weighted by purchasing power parity rather than market exchange
rates, a significant departure from the Bank’s methodology. Despite
having numerous existing categories, when the Bank and Fund reported
the outcomes of their governance reform negotiations in 2010, they
created bespoke classifications that resulted in over-reporting of
the share of votes shifted to developing countries (see Update 70,
72).
===================================================================
8. Capital controls: IMF gradual change of heart continues?
---------------------------------------------------------------------
The G20 released conclusions on managing capital flows, while papers
suggest the IMF’s gradual moves to accept national regulations on
international capital flows continues.
In October, G20 finance ministers issued a paper on Coherent
conclusions for the management of capital flows. This confirmed the
step-back from the IMF’s attempt to develop a ‘code of conduct’ for
capital controls (see Update 76). Instead, they emphasised that
"there is no one-size-fits-all approach or rigid definition of
conditions for the use of capital flow management measures." While
saying that measures should be "targeted to specific risks",
"regularly reviewed", and "adapted or reversed as destabilising
pressures abate", they cautiously support the increasing use of
capital controls and other capital account management policies, by
G20 and other countries.
The IMF’s previous position that such controls should be used as a
last resort (see Update 75) appears to be losing traction. The Fund
recognised as much in its September Multilateral surveillance report,
which says that "capital flow management tools are useful for
changing the composition of capital inflows." This follows the line
of an August IMF staff discussion note, The effectiveness of capital
controls and prudential policies in managing large inflows, which
argues that "for reasons that are not yet fully understood, capital
controls and related prudential measures achieve their stated
objectives in some cases but not in others."
However, the discussion note focuses on "countries that have already
liberalised many types of international capital flows", not countries
such as China and India, which have "comprehensive systems" that
"allow for close monitoring of flows and a calibrated tightening of
controls when needed." Even so, the discussion note finds that
"controls are more effective in countries [such as China and India]
that more heavily control capital flows" but does not reflect on the
implications of this, or whether such controls have contributed to
the marked economic success of these countries in recent decades.
Instead, the paper concludes that: "capital controls lose their
effectiveness over time, as markets find ways to circumvent them";
that while controls can "change the composition of inflows" to
encourage longer term flows, they "have little effect on overall
flows" and "in most cases, controls also have little effect on
currency appreciation." The paper finishes by calling for more
research, and better understanding of the impacts of different types
of controls.
Roberto Frenkel, of Argentinian NGO CEDES, speaking at a May
conference on managing capital flows co-organised by the IMF and the
Brazilian government gave an alternative perspective: "The main
reason why I think [capital control] policies should be implemented
is because of the effects that capital inflows have on the real
exchange rate, which represent a threat [to] economic activity,
employment and more generally on the economic development of these
countries."
Alternative approach
--------------------
Meanwhile, in November, Stephany Griffith-Jones and José Antonio
Ocampo, both of Columbia University, and Kevin Gallagher of Boston
University, released an issues paper calling for an alternative
approach. It summarises the discussions of an independent task force
on capital flows management that also included former Reserve Bank of
India deputy governor Rakesh Mohan. They argue that IMF
"prescriptions fall short of being sound advice for many developing
countries" and instead capital account regulations "should be seen as
an essential part of the macroeconomic policy toolkit and not as mere
measures of last resort." They propose a set of guidelines for the
use of such regulations, and call for the IMF and other global bodies
to "make a stronger effort to reduce the stigma attached to capital
account regulations and protect the ability of nations to deploy
capital account regulations to prevent and mitigate crises."
The effectiveness of capital controls and prudential policies in
managing large inflows, IMF
tinyrul.com/IMFcapitalcontrolspaper
Griffiths-Jones et al: Capital account regulations for stability and
development
tinyurl.com/alternativeapproach
=====================================================================
9. IMF’s focus on austerity proved "wrong, wrong, wrong", say critics
---------------------------------------------------------------------
While Christine Lagarde and staff at the Fund begin to acknowledge
that too much austerity is risking jobs and growth and civil society
groups call for an end to IFIs policy conditions, IMF programmes
continue to promote fiscal retrenchment.
The IMF special report for the October G20 finance ministers’
meetings, Global Economic Prospects and Policy Challenges, suggested
that austerity measures may have gone too far (see Update 77, 76,
75). The report stresses that advanced economies "have scope to slow
their current pace of consolidation, if offset by a commitment of
additional tightening later," and concludes that "the path to
recovery has narrowed, but the path is still open, if action is taken
now." US-based economist Paul Krugman argues the IMF’s report "is
essentially a declaration that the focus on universal austerity was
wrong, wrong, wrong", and might be a sign that economists at the Fund
"are rightly frightened by the economic outlook."
Kemal Dervis, former Turkish finance minister, said that "stimulate
now and announce future retrenchment can be the answer ... but the
retrenchment must not create anxiety about the future that would
nullify the stimulus."
Austerity threatens children
----------------------------
Continuing previous debates on the impact of IMF programmes on social
spending (see Update 74, 72), an August IMF staff discussion note
presented an econometric analysis of the impact of IMF programmes on
health and education spending in low-income countries (LICs). The
study, which uses data between 1985 and 2009 for 140 countries, finds
that LICs’ education and health spending as a proportion of GDP "have
risen during IMF-supported programmes at a faster pace than in
developing countries as a whole." It showed no impact of IMF
programmes on such spending in middle-income countries.
However, the technical grounds of the study were criticised by Brook
Baker, policy analyst at US-based NGO Health GAP, who pointed out
that "if the absolute value of GDP and/or government spending went
down or remained stagnant as a result of structural adjustment and
fiscal austerity, then stable or slightly increasing percentages
might not represent the positive changes on real spending that might
have resulted from more robust and expansionary fiscal and monetary
policy." Baker also argued that "the IMF’s macroeconomic
fundamentalism and its impact on health has to be judged not just
against a cohort of even weaker performing LICs, but against what was
possible if the IMF had been less dogmatic and more accommodating of
more expansionary economic policies that increased investments in
health, education, job creation, and more egalitarian and sustainable
economic development."
Meanwhile, a September report by UNICEF warns that "the current wave
of fiscal consolidation that is taking hold of developing countries
... threatens children and poor households’ survival, nutritional
growth and other rights." The report, which examines the latest IMF
government spending projections for 128 developing countries, points
out that although most countries introduced fiscal stimulus packages
during 2008 and 2009, since then "the scope of austerity has widened
quickly."
In order to identify the different adjustment options considered by
governments, the study also reviews policy discussions and other
information contained in IMF country reports between January 2010 and
September 2011. It finds that an increasing number of countries are
considering adjustment measures like "wage bill cuts/caps, subsidy
reversals and rationalising social protection schemes in order to
achieve cost-savings; many governments are also considering
introducing or increasing consumption taxes on basic products that
vulnerable populations consume."
Conditionality: NGOs vs IMF
---------------------------
NGOs and the IMF remain at loggerheads over a study on conditionality
being conducted by the Organisation for Economic Co-operation and
Development (OECD), a rich countries’ think tank. The OECD task team
on conditionality (TToC) is reviewing the experience of
conditionality reform after the 2005 Paris declaration on aid
effectiveness. It will submit reports ahead of the late November 2011
Busan High Level Forum on Aid Effectiveness. Early in 2011, a draft
overview report for the TToC by development consultancy firm Mokoro,
found that "the available evidence suggests that restrictive macro-
economic policies have meant that African economies have elected to
save a significant share of increased aid flows instead of absorbing
them in increased public expenditure or private sector growth."
Leaked emails show that at the insistence of the IMF, the TToC’s
final version of the report was drastically altered with a watered-
down recommendation that the process of setting macro-economic
targets should be opened up to broader discussion.
In late September, Better Aid, an umbrella organisation of over 1000
civil society organisations working on development effectiveness,
sent a letter to the task team expressing their "concern about the
decision of the chairs of the TToC not to submit any message on
conditionality for inclusion in the draft Busan outcome document" and
called for "an end of donor and IFI implicit and indirect policy
conditions."
G20 urges IMF to set up new lending window
------------------------------------------
At their summit, G20 countries asked the IMF to set up a new short-
term lending window, called the Precautionary and Liquidity Line
(PLL), which Lagarde said would "provide increased and more flexible
short-term liquidity to countries with strong policies and
fundamentals facing systemic shocks." The loans would be over a six-
month period. Media reported that the PLL would have a borrowing
limit of five times quota. The PLL seems targeted at non-eurozone
countries that might be negatively affected by a renewed recession in
Europe.
Austerity measures threaten children and poor households, Unicef
tinyurl.com/UNICEFausterity
=====================================================================
10. Guest analysis - Despite evidence, Bank still promoting water
privatisation
---------------------------------------------------------------------
By Gaurav Dwivedi, Manthan Adhyayan Kendra, India
Bank-funded private water projects across the world are facing
serious financial, socio-political and operational problems, but
recent trends show that more such projects are coming up.
In August, Indian policy research group Manthan Adhyayan Kendra
released a detailed study of the Khandwa water project, part-financed
by the International Finance Corporation (IFC), the World Bank’s
private sector arm. The project is a public private partnership (PPP)
sanctioned under a central government scheme for building urban
infrastructure in towns. This model of urban infrastructure
development through privatisation of public services, like water, is
to be replicated across India. The IFC has invested $5 million out of
a total PPP investment of $39 million in two water and waste water
projects, including Khandwa.
The study shows that even though this is a PPP project, the majority
of the funding comes from public resources, including more than 90
per cent of the capital expenditure of $28.8 million. The private
operator will also charge the city for operation and maintenance
under the agreement.
The study finds that the costs to the the city would rise
exponentially once the project begins delivering water, with
operating expenses increasing almost fourfold. Although the project
is in the final phase of construction and will start operating
shortly, it is still not clear if poor and low-income areas will be
provided with piped water. There are concerns that public water stand
posts may be dismantled to reduce so-called water loss.
The initial project proposals show that the city wished to add
several measures to it, including a 24 hour supply requirement and
wider distribution. However, when the bidding and tendering began
these measures were dropped to make the project more profitable and
less risky.
New IFC ventures with multinational corporations
------------------------------------------------
In July 2010, the United Nations General Assembly passed a resolution
recognising access to clean water and sanitation as human rights. The
evidence over the years has shown that pricing and privatisation
means that water as a human right suffers immensely.
Despite this, the IFC continues to promote the involvement of private
players in the water sector in several countries in Asia and Africa.
In what critics say constitutes a conflict of interest, the IFC often
provides technical advisory services to governments on water sector
reforms, which recommend privatisation or PPPs, whilst acting as an
equity investor in many private water companies.
The latest is Ghana, where the IFC is promoting private provision of
water in villages through it’s "Safe water for Africa" partnership
with Coca- Cola, Diageo and WaterHealth International (WHI, see
Update 77). The IFC announced plans to invest $1 billion in the water
sector and now seems to prefer to use the WHI model to push private
water delivery.
A recent paper by US-based NGO Corporate Accountability International
asks: "what is the ulterior motive, or at least the commonality of
interests between these corporations in financing WHI’s expansion? At
least three strategic outcomes can be observed: (1) self-dealing
(profiteering), (2) political and cultural commodification of water,
and (3) advancement of a self-proclaimed ‘new global architecture’
for corporate control of water."
Continuing this trend further, the World Bank Group, lead by the IFC,
announced in October a new venture with global corporations including
Nestlé, Coca-Cola and Veolia called the 2030 Water Resources Group
(WRG) Phase 2. This aspires to "transform the water sector" by
bringing together multinational corporations with huge financial
investment into the water business, which has been predominantly a
public service in most countries. This venture has already received
$1.5 million in IFC funding.
The group’s strategy is to insert the private sector into water
management one country at a time, through a combination of industry-
funded research and direct partnerships with government agencies.
Currently, WRG is formally working with the governments of Jordan,
Mexico and the Indian state of Karnataka, with scaling up envisaged
in South Africa and China. Vinay Baindur, an expert on water and
urban issues working in Karnataka, notes that the World Bank, the
government and the private sector are working in "a tripartite
partnership to expand the stake for profits." He calls the expected
water supply privatisation in at least six more towns "a very well
coordinated move on part of the water companies and the World Bank."
===================================================================
11. Little currency for global money?
---------------------------------------------------------------------
While the G20 postponed decisions on issuing new special drawing
rights (SDRs), the IMF-managed international reserve asset, the IMF
completed its surveillance review and a new Fund report tackled the
thorny issue of global imbalances.
Expectations that the Cannes G20 summit might agree further issuance
of SDRs (see Update 65) were quashed, with the issue postponed to the
G20 finance ministers meeting in February 2012. Meanwhile, an October
IMF staff discussion note, Internationalisation of emerging market
currencies, reiterated past IMF arguments that the solution to the
decline of the dollar should be the gradual use of other currencies
starting with the Chinese renmibi. Aldo Caliari, of US-based NGO
Center of Concern, called this a "narrow agenda that seeks to broaden
the currency basket not guided by any particular rationale to make
the basket more stable and flexible, but by geopolitical realities".
To tackle the global economic imbalances that many argue were an
essential precursor to the current crisis (see Update 77, 75), the
G20 made only the usual affirmations of the need to "move toward more
market-determined exchange rate systems". However, in a September
article, Jan Kregel of the Levy Economics Institute argues that this
would entail a major change of policy in China and other fast-growing
developing countries. He concludes that "if we are going to ask
developing countries to contribute to international stability by
growing less rapidly or shifting strategy ... this will come at a
cost to the developing countries in terms of foregone income growth,
which should be offset by the developed countries."
The IMF’s first Consolidated spillover report, examining the effects
in other countries of the policies of five globally important
economies - the US, China, the UK, the eurozone and Japan - pulls
fewer punches. It comes down on the side of China in the ongoing
argument over whether surplus or debtor countries bear more blame for
any negative impacts of global imbalances. While China’s gradual
approach to increasing the value of its currency "yields only modest
growth spillovers", a tightening of US monetary policy (by for
example raising interest rates) "will reverse the rise in emerging
market capital inflows and currencies" - confirming the analysis of a
recent report by intergovernmental organisation the South Centre,
that the boom in capital flows to developing countries is built on
the fragile foundations of low interest rates in northern countries
(see Update 75).
IMF surveillance review
-----------------------
In October, the IMF completed its Triennial Surveillance Review, the
first to assess IMF surveillance at the multilateral in addition to
its normal country level assessments. The central issue of traction,
or rather the IMF lack of traction or influence over major economies,
has been recognised by many as being at the heart of the IMF’s
failures in the run up to the crisis (see Update 74). The review
notes that "interviewees suggested that the Fund was insufficiently
critical of the policies of its major shareholders." However, its
recommends only to "bring external views into surveillance to
increase its candor."
IMF assessments of exchange rates caused most debate among board
members. The review promised to "improve consistency and transparency
of exchange rate analysis and ensure discussions of external
stability in staff reports extend beyond exchange rates." The IMF’s
executive board endorsed the review’s recommendations.
Compilation including Kregel article
tinyurl.com/FESmonetary
Triennial surveillance review
tinyurl.com/IMFtriennial
===================================================================
12. IFIs admit failure to put jobs at the centre
---------------------------------------------------------------------
While the International Labour Organization (ILO) warns of social
unrest coming from record unemployment, the IMF and World Bank are
being criticised for hindering workers’ rights and not putting jobs
at the centre of recovery.
An August joint World Bank-IMF discussion note mentions concerns
about a jobless recovery in advanced economies, and workers’
vulnerability to shocks in developing countries. At the same time, it
admits that their support to countries "is not structured with that
centrality of jobs in mind", and that in their macroeconomic work
they "tend to assume that employment will be created if growth
materialises."
Although these statements suggest a shift in the IFIs’ mentality in
relation to jobs, this is not always translated into progress on the
ground (see Update 72). An International Trade Union Confederation
(ITUC) October communiqué criticised IMF-inspired changes to
Romania’s labour laws. The government enacted the reform in April,
weakening employment protection, without first checking whether it
violated the European Union (EU) or ILO core labour standards. The
new laws exclude some workers from the right to union membership and
introduce obstacles to collective bargaining. In mid October, Sharan
Burrow, general secretary of the ITUC, said that "the IMF
prescription in Romania contradicts the positive signals about
workers’ rights from its Washington headquarters" and expressed fears
that "governments are dancing to the tune of the discredited
orthodoxies of IMF labour and fiscal conditionality."
Bank progress and pitfalls
--------------------------
In October, the Bank released the latest of their controversial Doing
Business reports (see Update 73, 67, 66). Peter Bakvis from the ITUC
said the new report confirms that "the Bank has not yet taken any
action to correct the ‘Paying taxes indicator’", thus "encouraging
countries to become tax havens, provide insufficient social
protection and government services, or place an unfair tax burden on
workers and consumers." Using data from the report, a November
article from US magazine Time observes that "a number of lower-ranked
nations - including South Africa, China and Brazil - have had much
faster-growing economies than the U.S. in the past five years" and
concludes that "nations with more rules grow faster." Bakvis argues
that the results of the Time article "are the exact opposite of what
the Bank has claimed without a shred of evidence over the eight years
that it has published Doing Business, namely that the most
deregulated countries have the highest rates of growth."
A November report by the ITUC reviews the evolution of the Bank’s
approach to the ILO core labour standards (CLS). The report welcomes
the Bank’s endorsement of CLS over the last decade but laments that
"the inconsistent adoption and application of the standards among the
different divisions of the World Bank Group has created ambiguities
and administrative complications." The enforcement of CLS within the
wider World Bank Group is likely to be a key issue during the Bank’s
next safeguard review (see Update 77). The ITUC report also points
out that trade unions have detected 27 cases of non-compliance by
firms in which the IFC has invested. It stresses that while some of
the unions’ complaints to the IFC "were responded to quickly and
corrective actions were taken expeditiously, in other cases the
response time was very lengthy and no effective corrective action was
taken."
Bank angers trade unions
------------------------
The Bank is currently drafting its social protection and labour
strategy for the decade 2012-2022. It recently published the results
of the first phase of consultations on the concept note. Although
throughout the document the Bank emphasises that "more than 1,700
individuals and organisations provided their views", and the terms of
reference for the strategy say that the advisory group will include
CSOs, the ITUC complained that there was no union or any other civil
society representative included in the group. Francesca Ricciardone,
from the ITUC, explained that the report on first phase consultations
ignores practically all the recommendations made by them, "notably
the failure to provide an analysis of the global jobs crisis and put
forward solutions, failure to address growing income inequality, no
mention of the role of unions and workers’ rights and no support for
a social protection floor." Phase two of the consultations is planned
for November and December this year, and the Bank hopes to launch the
new strategy in early 2012. Though the consultations are now open,
the Bank is late in preparing a draft of the strategy which is only
expected to be released midway through this consultation period.
===================================================================
13. New World Bank corporate scorecard: adding value?
---------------------------------------------------------------------
After discussions with the executive board and staff, but no public
consultation, the Bank released a "corporate scorecard" in September,
aiming to provide "a snapshot of the Bank’s overall performance" to
help "strategic dialogue between management and the board on progress
made and areas that need attention." The Bank will issue the
scorecard annually.
The scorecard has four "tiers" of indicators ranging from the high
level development outcomes of tier one, such as population below the
$1.25 poverty measure, to organisational effectiveness issues covered
under tier four.
Some board members, such as the UK, are hoping it will drive
performance at the Bank (see Update 77). However, availability of
data heavily influences the selection of indicators, with the Bank
admitting that "most scorecard indicators were largely selected from
a broader set for which reliable data already exist."
Elizabeth Arend of US-based NGO Gender Action said "the scorecard’s
narrow approach to gender issues is extremely disappointing. Critical
indicators on health and agriculture, for example, are not sex-
disaggregated, making it almost impossible to judge whether real
progress has been made. Criteria for other indicators is also
questionable. For example, the scorecard measures ‘projects with
gender-informed design’, but does not hold the Bank accountable for
gender-informed project implementation, monitoring and evaluation."
World Bank corporate scorecard 2011
tinyurl.com/corporatescorecard
===================================================================
14. IFC accused of standards breach over Ugandan land grab
---------------------------------------------------------------------
A September report by NGO Oxfam International includes criticism of
forestry operations in Uganda in which the World Bank’s private
sector arm, the International Finance Corporation (IFC), has a stake.
More than 20,000 villagers claim to have been unjustly evicted from
their homes by UK-based New Forests Company (NFC) to make way for
plantations. In the wake of criticism of the Responsible Agricultural
Investment principles the Bank co-authored (see Update 77, 76), Oxfam
says the Ugandan case highlights "how the current system of
international standards does not work."
The World Bank has called on NFC to investigate the alleged abuses,
which the IFC had noted in a field assessment even before investing
in the private equity fund that bankrolled the firm. The villagers
claim rights to the land they were occupying, and had managed to win
court orders restraining evictions which, they say, were not
observed. Oxfam raises the prospect of breach of IFC performance
standards regarding forced evictions, lack of compensation, and
absence of prior consultation. "There were no consultations," father
of nine Augustin Allen told Oxfam. "They cut down our crops, burnt
and demolished our houses."
The IFC’s March 2010 field assessment observed NFC had been "unable
to apply comprehensively its principles guiding resettlement", and
that "only a full social audit of resettlement can provide sufficient
evidence such that IFC can negate the allegations." Yet two months
later, the IFC invested $7 million in private equity fund Agri-Vie,
in whose portfolio NFC sits.
Oxfam notes that the case raises particular concern given the
involvement of the IFC and other international funders claiming to
adhere to social and environmental standards.
tinyurl.com/ugandalandgrab
===================================================================
15. Analysis in conflict WDR criticised
---------------------------------------------------------------------
The World Bank’s 2011 World Development Report (WDR) on Conflict,
Security and Violence (see Update 77) was challenged in a paper that
criticises it for analytic deficiencies - "lump[ing] gangs together
with ... drug cartels, terrorists or even rebel groups" - and for
saying that "violence relates to institutional deficits", while
"barely mak[ing] any mention of democracy." The paper argues that
this reflects a narrow emphasis on institutional economics - "almost
all the literature cited is economic and is principally based on
quantitative correlations between economic and political factors and
conflict" - with little historical or sociological perspective.
tinyurl.com/conflictWDRpanned
===================================================================
16. DFID’s multilateral funding questioned
---------------------------------------------------------------------
The UK parliamentary Public Accounts Committee (PAC) has questioned
the government’s rationale for increasing funds to multilateral
agencies, such as the World Bank. The cross-party PAC suggests that
"the strategy to increase the Department for International
Development (DFID) spend through multilateral programmes appears to
have more to do with it being easier ... than for [DFID] to assess
the viability, effectiveness and value for money of bilateral
programme proposals." In March, DFID acknowledged weaknesses in the
Bank’s International Development Association (IDA), while praising it
overall as a channel for UK aid (see Update 77, 75).
tinyurl.com/PAC-DFID
===================================================================
17. World Bank poverty findings challenged
---------------------------------------------------------------------
A new Basic Capabilities Index (BCI), published by civil society
network Social Watch, is "closer to reality than the one-dollar-a-day
line of the World Bank", according to Social Watch director Roberto
Bissio. The BCI is derived from well-being indicators such as
malnutrition and primary education. The Bank adjusted its measurement
to $1.25 a day in 2008, but it was still criticised for being too low
and not suitable for cross-country comparison (see Update 62). Whilst
the World Bank claims that, globally, average poverty was halved
between 1980 and 2005, the BCI shows very slow progress in the last
20 years.
Basic Capabilities Index 2011
www.socialwatch.org/node/13749
===================================================================
18. Bank’s procurement rules "rigid"
---------------------------------------------------------------------
The UK House of Commons International Development Committee (IDC) has
expressed concerns that "when bidding for infrastructure projects,
local contractors often do not stand a chance against international
bidders, partly due to rigid rules used by multilateral development
banks such as the European Union (EU) and the World Bank." The IDC’s
September report calls on the UK Department for International
Development to use its leverage to ensure that the World Bank builds
"capacity within developing country government procurement
processes", arguing that procurement of goods and services can reduce
poverty by providing local firms with contracts and boosting local
employment.
tinyurl.com/IDC-Infra
===================================================================
19. Inflation "obsession" hurting Kenyan growth
---------------------------------------------------------------------
Constraints placed on the central bank of Kenya’s monetary policy by
the IMF have been condemned as damaging to Kenya’s growth. Writing in
Nairobi’s Business Daily in late September, banker Mohammed Wehliye
railed against IMF conditions which force the central bank to adopt a
monetary policy prioritising low inflation at the expense of credit
creation. He argued that "the IMF is not one to worry about our
economic growth". Noting that the IMF’s "obsession" with low
inflation had already failed in other African countries, he wrote
that Kenya should be free to choose its own economic priorities and
not be "locked into the IMF’s preferred ideological straightjacket."
tinyurl.com/wehliyeIMF
===================================================================
20. IMF’s "trusted advisor" role to be scrutinised
---------------------------------------------------------------------
The IMF’s Independent Evaluation Office (IEO) released an issues
paper describing how it will assess whether the IMF has strengthened
its "trusted advisor" role since 2005. It will look at how
perceptions of the Fund as an advisor have been affected by new IMF
surveillance and advisory initiatives introduced after the global
economic crisis. It notes that previous IEO reports have found that
countries are often wary of the IMF’s advice, citing "inadequate
knowledge of country-specific circumstances" and "a perceived lack of
evenhandedness" as explanatory factors. The paper will focus on
perceptions of IMF advice, but "not, however, assess the actual
impact of this advice."
tinyurl.com/ieopaperimfrole
===================================================================
21. IFI’s macroeconomic policy "anti-growth"
---------------------------------------------------------------------
"Why have the policy tutors performed so miserably and the pupils so
brilliantly?", wondered professor John Weeks of the School of
Oriental and African Studies in an October article for Social Europe
Journal. He notes that developing countries who embraced the World
Bank and IMF’s macroeconomic orthodoxy have fared the worst in recent
crises, whereas those that have best weathered the storm have in
common "exactly those sins/virtues absent in the ‘advanced’
countries: willingness to intervene with growth-enhancing policies".
Weeks cautions that advanced countries are now ready to apply "the
neoliberal anti-growth Washington Consensus macro policies" at home.
tinyurl.com/weeksifis
===================================================================
22. IMF still divided on gold sales windfall
---------------------------------------------------------------------
The executive board of the IMF continued to disagree, in an early
September discussion, on what to do with the $2.76 billion windfall
profits from its 2009-10 gold sales (see Update 75, 67). The sales
aimed to fund an endowment for financing the Fund’s administrative
costs such as salaries. The Board members remain split as to whether
to put the extra money toward the endowment, the Poverty Reduction
and Growth Trust, or precautionary balances in light of heightened
credit risk. The windfall, which resulted from high gold prices at a
time of global uncertainty, will remain in the endowment account
until another meeting on the subject in 2012.
tinyurl/goldsalesdelay
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