Global Policy Forum

UK 'Threat' to World Bank Brings a Little Cheer


By Sanjay Suri

Inter Press Service
September 15, 2006

The British government statement that it is withholding some funds from the World Bank has drawn conditional praise from aid agencies.

Britain's international development secretary Hilary Benn has announced that the government will hold back 50 million pounds (95 million dollars) from the World Bank unless the institution eases lending conditions to developing countries ?- in effect stops forcing poor countries to privatise their public services and open up markets to foreign competition.

The money in question is not enough, says the Charity War on Want. "The sum mentioned by Benn is a tiny fraction of the 1.3 billion pounds (2.4 billion dollars) pledged to the Bank by his department over the next three years, and the threat therefore lacks the necessary bite," the charity said.

John Hilary, Director of Campaigns and Policy at War on Want, said: "Hilary Benn has got the right idea but the wrong numbers. We commend the decision to withhold funding, but the threat should be made a real one." Hilary said that "the free market policies of the World Bank have condemned many developing countries to greater poverty, and the UK government should have nothing to do with such policies. Benn should withhold all funding from the World Bank and IMF until they drop these harmful conditions on poor countries."

But other groups say that the move is nevertheless a significant one. "We want the UK government to put pressure on the World Bank and the IMF," Anna Thomas from Christian Aid told IPS. "By making this move, the government is putting pressure, and we are very pleased to see that. And if they do not respond, then we would like to see the government route more money for development through other channels."

Much development aid from the World Bank and the International Monetary Fund (IMF) has long been tied to demands for opening up of market sectors in countries receiving the aid. Britain and Norway are among few countries that do not tie development aid to demands for liberalising economic policy.

The small but significant move could well have strong impact, Thomas said. "The evidence for a need in World Bank policy is coming from its own research," Thomas said. "The World Bank is currently reviewing the conditionalities attached to grants and lending, so we hope it will respond to the UK move." Christian Aid has been in the forefront of demands since July this year for the British government to put pressure on the World Bank to change its policy.

Britain's World Development Movement welcomed the move as a "partial victory" for campaigners. "If the purpose and effect of this initiative is to stop the Washington-based institution from forcing developing countries to 'liberalise' their economies and privatise services then the British government is, at last, accepting WDM's argument that aid should not be tied to such conditions," said WDM director Benedict Southworth.

"Mr Benn is responding to the calls of campaigners by signalling a welcome first step and establishing a benchmark against which the future actions of government will be measured." Southworth added: "The minister has established the principle that Britain's contribution to the international financial institutions is to be made dependent on these bodies accepting that developing countries ought to be able to make their own economic decisions. If this approach is pursued it would transform the prospects of developing countries."

Any change of policy by the World Bank would come as an important signal for all development aid through governments or multilateral lending agencies. Aid agencies within Britain are now planning to pile on the pressure for the government to do more. "We now urge Britain to go the extra mile and withhold all its monies," Christian Aid's head of policy Charles Abugre said in a statement. "Until these organisations fundamentally reform and allow poor countries space to develop they will remain a busted flush which we must not underwrite."



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