Report Warns of Loan Pitfalls
By THE ASSOCIATED PRESS
March 27, 2001
Filed at 3:26 p.m. ET
WASHINGTON (AP) -- Add ``conditionality'' to the buzzword
junkyard. The World Bank and the International Monetary Fund say making
developing countries in Africa jump through too many hoops to get money doesn't
work.
The bank said Tuesday in a new report that these countries
are unlikely to adopt reforms to stimulate their economies and reduce poverty
unless governments and their peoples broadly support the need for change.
In development economics this is called ``country
ownership,'' and David Dollar, the co-author of the bank's report said,
``conditionality cannot be a substitute for commitment. Reform has to be home
grown.''
Dollar said governments receiving aid welcome a modest
amount of conditions -- stabilizing exchange rates or fostering development of
an independent judicial system -- but imposing dozens of them is largely
ineffective.
Lawmakers in the United States and other industrialized
countries and international relief groups have long been critical of the bank
and its sister institution, the IMF, for imposing a laundry list of conditions
on poor countries to qualify for loans.
Now the bank and the IMF are moving to streamline loan
conditions and not demand that countries make so many changes that they strain
their economies' ability to carry them out.
Last week the IMF announced it was developing a new set of
lending guidelines ready for board approval later this year that will
significantly reduce the number and scope of demands on IMF borrowers.
``The aim of this streamlining is not to weaken the
implementation of fund programs,'' said Masood Ahmed, deputy director of the
IMF's policy department. ``Rather it is to ensure that countries have the
maximum possible scope to make their own policy choices.''
The World Bank report, ``Aid and Reform in Africa: Lessons
from 10 Case Studies'' covered the Ivory Coast, Democratic Republic of Congo,
(formerly Zaire) Ethiopia, Ghana, Kenya, Mali, Nigeria, Tanzania, Uganda and Zambia
from the 1980s to the mid 1990s.
``All of the case studies agree that economic policy is
primarily driven by domestic politics not outside agents,'' the report said.
``The key to successful reform is a political movement for change and donors
cannot do very much to generate this.''
The report identified Ghana and Uganda as the most
successful reformers, who grew rapidly and reduced poverty. The eight other
countries did not.
The report said where governments are not committed to
reform ``conditional loans have generally been a farce in which the government
agrees to measures it does not believe in as a way of getting funding, fails to
carry them out and then receives the funding from donors anyway.''
Co-financed by European aid donors, France, Germany, the
Netherland, Norway and Sweden, the study seeks to help the international
development community direct foreign aid to poor countries most likely to use
it effectively.