Response to the Christian Aid Campaign on World Bank and International Monetary Fund (IMF) conditionality

August 2006

Thank you for your letter outlining your concerns that the World Bank and IMF continue to impose economic policies on developing countries through conditionality. You call for the UK to withhold funding from these institutions until they stop using economic policy conditionality.

The Government firmly believes that countries should lead their own development and that conditions linked to aid should not be used to impose policies on governments. We made this clear in the UK policy on conditionality published in March 2005 - Partnerships for poverty reduction - rethinking conditionality(137 kb). This is why this Government has pushed for the significant improvements made to the way the World Bank and IMF use conditions over recent years. But I feel that condemning the international financial institutions for past behaviour that they are now trying to change – and that we are encouraging them to change – isn’t the right approach.

I am not convinced by the evidence on which Christian Aid’s latest report is based. The report claims that the World Bank and IMF are still imposing policies on developing countries. It seems that they have reached this conclusion by assuming that every condition and benchmark that appears in a World Bank or IMF program has been imposed, but they undertake little analysis to judge whether or not this really is the case and to assume imposition in every case is misleading.

I do not agree that withholding UK funding to the World Bank and IMF would be appropriate; nor do I think developing countries would support us taking such a stance. I also think it is more likely to be damaging to the poor. First and foremost, it would mean that valuable development projects would have to be stopped. In the last month alone the Bank approved 44 new projects in 30 of the world’s poorest countries. Among many other benefits for poor people these projects will:

• provide access to clean water for 7 million people in rural Indonesia
• provide access to electricity for 400 more towns and villages in Ethiopia
• increase the number of children in school in Burkina Faso.

Withholding UK funding would also mean that our share of the debt cancellation agreed at Gleneagles would be unfunded. I find it hard to believe that you are seriously arguing for this.

This Government has played a leading role in pushing for the improvements in the use of conditionality by the World Bank and IMF in recent years, and we will continue to do so. In response to calls led by the UK the World Bank carried out a review of conditionality in 2005. This led to the adoption of five good practice principles for conditionality. This was another important step forward and we place great importance on the World Bank implementing these principles. Many other shareholders do not share the UK's views on the role of conditionality. I believe that withholding our funding as suggested would leave us with very little ability to influence further change.

I hope this is helpful.

Hilary Benn
Secretary of State for International Development

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