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FINANCE: Europeans Asked to Pull Strings at World Bank

Emad Mekay

WASHINGTON, Mar 10 2007 (IPS) - Campaigners across Europe have called on their governments to withhold funds from the World Bank unless specific changes are made to policy and practice at the Washington-based public lender. But analysts say that if the past is any indication, a positive response is unlikely.

The campaign, dubbed “Put Your Money Where Your Mouth Is”, comes at a time when World Bank President Paul Wolfowitz is seeking greater contributions from European governments for the International Development Association (IDA).

The IDA offers interest-free credits and grants to low-income countries. The second funding cycle will be for three years, from Jul. 1, 2008 to Jun. 30, 2011.

Bank officials met with European representatives on Mar. 5-6 to seek replenishment for the World Bank’s soft loan window, which happens every three years.

“We urge European governments to use these contributions to leverage reform at the World Bank during the current funding ‘replenishment’ round, to ensure that the Bank becomes an agency that acts in the interests of the world’s poorest people,” said dozens of civil society groups, trade unions and religious groups in a statement.

The groups include Action Aid, Christian Aid, SEED Europe in the Netherlands, CADTM Belgium, Alliance Sud in Sweden, Greenpeace International, Eurodad, and World Vision.

The IDA is funded largely by contributions from the governments of its richer member countries, which contributed more than half of the 33 billion dollars in the last IDA funding replenishment cycle.

Last year the top borrowers were Pakistan at 1.1 billion dollars, Vietnam at 768 million dollars, Tanzania at 751 million dollars and Ethiopia at 505 million dollars. Other top borrowers included India, Bangladesh, Nigeria, the Democratic Republic of Congo, Ghana and Afghanistan.

Analysts say that while calls upon European governments have found tepid reactions in the past, their increasing dissatisfaction with World Bank President Paul Wolfowitz may resonate this time.

“Europeans have more voting power than the U.S. If they were to collectively say we will not give IDA unless you do the following, that would carry incredible amount of weight,” said Manish Bapna of the Washington-based Bank Information Centre.

“It’s just that the Europeans historically have not bargained with IDA in such a way when the U.S. has in the past. What seems a bit surprising this time is that the Europeans may take a more aggressive step on IDA and some of that is attributed to their views on Wolfowitz.”

Some European officials have complained that Wolfowitz, more than 18 months in office now, has so far failed to articulate a new vision for the Bank. They complain that he appointed a small group of advisors who did not all enjoy European approval.

But the more than 60 European groups behind the push say that they want their governments, which provide more than 60 percent of World Bank funding, to use their leverage not because of their unhappiness with Wolfowitz, but because of the failure of the development model the Bank advocates.

They accuse the Bank of being too restrictive in its prescriptions to borrowing nations, and of favouring policies that have often led to worsening poverty and environmental degradation – charges that the Bank vehemently denies.

“The Bank should immediately stop tying their aid and loans to particular economic policies, such as privatisation, liberalisation and restricting public spending on health and education, and should allow countries to make their own policy choices,” said the dozens of civil society organisations, trade unions, religious groups in their statement.

“Many studies show that the World Bank continues to impose economic policy conditions and that these are often very harmful,” said Nuria Molina, policy and advocacy officer at the European Network on Debt and Development. “This must end.”

Over the last year, several European governments – notably Britain and Norway – have threatened to reduce Bank funding. Bapna says that those warnings will soon be tested.

“That’s rhetoric – ‘we want you to do this and this and we are not quite happy with you’ (Wolfowitz). But when push comes to shove, whether the Europeans will really be willing to use IDA unless they get some changes is unclear,” Molina said.

The Bank has long argued that the IDA has helped the global fight against poverty. Prior to the meeting this week, it prepared a report before the replenishment request to showcase its achievements over the past 10 years.

The report says that representatives of borrower countries from each IDA region have been invited to take part in the replenishment negotiations for the past three fundraising rounds.

The Bank also contends that the IDA has been the single largest source of donor funds for basic social services in the poorest countries and that it remains one of the largest sources of assistance for the world’s 82 poorest countries, 39 of which are in Africa.

The IDA lends money on concessional terms. This means that IDA credits carry no interest and repayments are stretched over 35 to 40 years, including a 10-year grace period.

Eighty-two countries are currently eligible to borrow from the IDA. Together, these countries are home to 2.5 billion people, half of the total population of the developing world.

In fiscal year 2006, which ended Jun. 30, 2006, IDA commitments totaled 9.5 billion dollars.

Civil society groups say they will intensify their drive in time for the second IDA replenishment meeting, currently scheduled for June in Mozambique, where money and funding will be debated.

Funding levels will be eventually decided during the third meeting, which will take place at the October’s World Bank’s Annual Meetings in Washington, DC.