By Abid Aslam
InterPress News Service
October, 1996
The World Bank is hampered in its central mission of reducing poverty by its blindness to the very problem, according to the agency's internal watchdog. In a report discussed by the Bank's executive board in September and subsequently leaked to the press, the quasi-independent Operations Evaluation Department (OED) criticizes Bank management for conducting inadequate assessments of the extent and causes of poverty in borrowing countries. Even where the assessments are good, it adds, they serve little purpose in shaping Bank lending.
The OED report, compiled during 1995 and completed earlier this year, examines 46 poverty assessments conducted between 1988 and 1994. It finds that the Bank completed only half the number of assessments it had promised to undertake. Worse, the assessments it did conduct -- at a cost of more than $220,000 each -- were often seriously flawed.
The assessments are the foundation on which the Bank's poverty-reduction efforts are built. They are meant to survey poverty in a given country, diagnose its causes and the reasons for its persistence, and make recommendations for reducing it. They are supposed to help the Bank pursue its three-prong poverty-reduction strategy, delineated in its 1991 operational directive on poverty and an accompanying handbook. The three strategic elements are: broad-based, labor-intensive growth; health, education, and other investments in human resources'; and the provision of safety nets for those most vulnerable to being pushed off the economic tightrope.
This strategy was criticized at the time for not adequately addressing the real causes and conditions of poverty in borrowing countries. Yet, fewer than 60 percent of the poverty assessments meet the standards set in the 1991 directive and handbook, according to the OED report. Even at their best, the poverty assessments have only "a modest influence" on the country assistance strategies on which Bank lending programs are based. "Country assistance strategies [have] focused overwhelmingly on broad macroeconomic stabilization and structural reform issues, with few references to the status or causes of poverty, or to approaches to poverty reduction," the report says. Bank critics have long contended that the relationship between structural adjustment and poverty has not been investigated in the poverty assessments.
"Bluntly put," the OED report concludes, "a significant mismatch appears to exist between the ambition and specificity of [the operational directive on poverty] on the one hand, and the performance of the Bank and its borrowing member countries in delivering on its provisions, on the other." How Bank management responds to these criticisms will be a test of Bank President James Wolfensohn's ability to reform the institution, according to staff and some outside observers. Wolfensohn, the Bank's president since 1995, has set poverty reduction as the benchmark of his success, and on numerous occasions has expressed impatience with managers on this score. Early indications are, however, that management will argue that many of the problems highlighted in the OED report have since been fixed.
Although the most recent assessment evaluated by the report was conducted in 1994, the OED's findings have been borne out by two external studies since undertaken. In evaluations of poverty assessments in African countries, the Institute of Social Studies in the Netherlands and the Institute of Development Studies at the University of Sussex in Britain conclude that there remains what one Bank official termed "a high level of variability" in the quality of assessment reports.
Bank management has argued that the OED's interpretation of the poverty-reduction policy is too narrow. But the watchdogs believe that managers enjoy too much latitude and need to be held more accountable for implementing a sound and clear policy. "The operational directive is fair and clear," said one senior OED official. "We took it at face value."
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