6 September 2005

Make Poverty History campaign - response on conditionality

The Make Poverty History Campaign recently sent out an email to their supporters urging them to contact Gordon Brown and Hilary Benn to demand an end to economic policy conditions. HMT’s response to the many people who have written is as follows:

“We agree with your concerns about the harmful economic conditions that continue to be attached to aid and debt relief.

We recently announced a change to UK policy so that our aid is no longer conditional on specific policy decisions by partner governments. We are also pressing others, including the World Bank, to do the same.”

Full response

1. Throughout 2005, the Government has supported the aims of the Make Poverty History campaign. Individuals, church groups, Non-Governmental Organisations (NGOs) and other campaigning organisations have been pivotal in shifting international opinion in the past and were instrumental in securing the great steps forward made at Gleneagles.

2. The Government agrees with Make Poverty History that past practices on conditionality need to change. That’s why we launched in March a new policy “Partnerships for poverty reduction – rethinking conditionality”. We said that from now on, we will not make our aid conditional on specific policy decisions by partner governments. That includes policy decisions on sensitive economic policy choices like privatisation or trade liberalisation.

3. This doesn’t mean that there are no strings at all to our aid. We believe that effective development partnerships are based on a shared commitment to three objectives – poverty reduction and reaching the Millennium Development Goals (MDGs); respecting human rights and other international obligations, and strengthening financial management and accountability in order to avoid corruption and make sure that British taxpayers are getting value for money. Aid will only be withdrawn if there is a breach of one of these principles.

4. We believe that this is the right approach to conditionality – and we want other donors to adopt it too. So, we are already acting on the three issues now raised by Make Poverty History:

We are pressing the International Monetary Fund (IMF) and World Bank to reform their use of conditionality. They should continue to provide advice and expertise to partner countries, but should not impose particular policy choices.
We are pressing for increased debt relief. We believe that countries receiving debt relief must have good public expenditure management, to ensure that debt relief is used for poverty reduction. For the debt relief provided unilaterally by the UK, we use the approval of a World Bank Poverty Reduction Support Credit as an indicator of this. But we are working with the World Bank and others on improving the ways we assess countries’ public financial management systems, and are willing to look at alternative measures in the future.
The new conditionality policy says that the UK will not base its decisions about delivering aid on countries being on track with programmes of the IMF and World Bank. But a stable macroeconomic environment is critical as a basis for growth, the key to poverty reduction. The IMF has knowledge and expertise to make thorough macroeconomic assessments, and we will use the IMF’s assessments as an input into our decisions about aid delivery.

5. Finally – to set the record straight – we do not accept the Make Poverty History campaign’s account of how DFID has used conditionality in Tanzania, Zambia and Ghana. DFID did not require the Government of Tanzania to involve the private sector in water as a condition of aid. The Government of Tanzania sets its own policies and priorities and it was their decision to introduce private sector participation in the water sector in Dar es Salaam. The allegations about teacher recruitment in Zambia refer specifically to IMF conditionality. The IMF has publicly stated that it has never imposed a limit on hiring new staff in the education sector in Zambia. The IMF put a limit on the total wage bill to put it in line with the budget previously agreed by Parliament. The government of Zambia was free to choose how it allocated this wage bill. In Ghana, DFID supported a Government-led process to develop a more coherent policy on trade and agricultural development. As a result, the Government of Ghana now has the right to impose tariffs if they consider it to be in the interests of domestic businesses and consumers.

Make Poverty History campaign - response on conditionality

Full response

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