Conditionality VS Ownership A resolvable paradox Cairo 19

Conditionality VS Ownership: A resolvable paradox? Cairo, 19 January 2008

President Amadou Toumani Toure of Mali, Development Cooperation Forum 2005 “True partnership supposes autonomy of beneficiary countries in requesting aid and in determining its objectives… Often programs are imposed on us, and we are told it is our program…People who have never seen cotton come to give us lessons on cotton… No one can respect the conditionalities of certain donors. They are so complicated that they themselves have difficulty getting us to understand them. This is not a partnership. This is a master relating to his student. ” 2

World Bank Conditionality Review, 2005 “Traditional conditionality has often been judged as overly and increasingly intrusive, infringing national sovereignty (Drazen 2002), undermining domestic democratic process and institutions (Stiglitz 1999), and ineffective in bringing about the desired outcomes (Easterly 2005)” “Traditional conditionality in policy-based lending has often been criticized as being ineffective and intrusive” 3

“Policy conditionality…is both an infringement on sovereignty and ineffective” Africa Commission, 2005 World Bank and IMF Conditionality reviews: In 2002, IMF Conditionality Guidelines - In 2005, WB Good Practice Principles for the application of conditionality - Main objectives: Streamline conditionality; - Apply the principles of ownership, harmonisation, criticality, customisation, and transparency. - 4

World Bank: KEY FACTS Eurodad’s research published in November 2007: On average, each WB operation still contains 37 conditions - 71% of the WB operations still attach conditions containing sensitive policy reforms, such as privatisation and liberalisation - 5

IMF: KEY FACTS IMF Independent Evaluation Office 2007 reports: Number of structural conditions per operation unchanged; - IMF conditions are not critical; - Sectors: - privatisation and liberalisation of the financial and banking sector; - reforms of the fiscal systems; - Almost one fifth of the conditions are privatisation and liberalisation conditions. - Quantitative conditionality still overly stringent and undermining economic growth. - 6

Mapping out the brave ones Conditionality-friendless donors: - Norway, 2006: Soria Moria Declaration on International Policy - UK, 2006: White Paper “Eliminating World Poverty” Germany, the Netherlands, Italy: not quite there yet, but on their way… - - European Commission 7

The EC’s shift to outcomebased conditionality “Drawing on lessons from previous structural adjustment programmes and the recognition of the central importance of ownership, the European Commission has moved to an approach based on linking their aid to poverty reduction results”, EC Budget Support: An Innovative Approach to Conditionality. Country Sector Outcome indicator Burkina Faso ABRP 200508 Health % children vaccinated Mozambique PRBSP III 2006 -07 Education % completion rate – girls Tanzania PRBS III 2006 -08 Education % primary school enrolment 8

EC expectations for outcome-based conditionality - Encourage a focus on results by using indicators of service delivery / poverty reduction; Protect the political space for governments to determine policy; - - Streamline conditionality; - Promote domestic accountability; - Stimulate demand for quality data on poverty. 9

Policy and results: logics compared Policy actions in programmes Outcomes in programmes World Bank Burkina Faso PRSC 7: - Alignment to international market price - Contracts with professional operators to manage water systems Tanzania PRSC 5: -Reform of business activities registration Burkina Faso PRSC 7: - SOFITEX operating profit at $US Million (>0) - Access to drinking water % Tanzania PRSC 5: - Ranking on “Doing Business” European Commission No policy conditions are used to spell out the actions that the government should undertake to achieve a particular outcome Mozambique PRBSP III: - Primary school enrolment rate - Completion rate - Proportion of institutional deliveries among expected births 10

What has been the impact of outcome-based conditionality? Positive effects: Outcome-based conditionality has pushed a results based approach; - It has managed to streamline conditions; - But real concerns remain on attribution, predictability, etc. Can further potential be unleashed? - Improve process (including CSO participation) - Improve indicators (including choice of) - Improve collection and disclosure of data - Revise technical complexities and mechanistic approach 11

How to put governments in the driver’s seat – and yet feel safe Guiding principles to resolve the conditionality – ownership paradox: Conditionality should be only applied in cases where none of key stakeholders could reasonably object to; - Agreed standards and obligations should aim at increasing national leadership and policy space; - Mutual accountability has the potential of framing donorrecipient relationships in ways that could yield much better results. - 12

Recommendations for donors to Accra and Doha 1. Agree on policies to eliminate economic policy conditions; 2. Put pressure on the Bank and the Fund to streamline their conditionality and phase out economic policy conditions 1. 2. Set a target in the Paris Declaration on Aid Effectiveness and the IMF and WB conditionality reviews Set up an independent monitoring system to objectively assess progress made by the World Bank in the application of the GPPs 3. De-link their allocation and disbursement decisions from the IMF macro-economic assessments 4. Limit their conditions strictly to due process obligations and respect for internationally recognised standards and development goals. 13

By Nuria Molina-Gallart EURODAD nmolina@eurodad. org www. eurodad. org 14