The so long awaited Norwegian conference on conditionality is taking place next week in Oslo - on Tuesday 28th and Wednesday 29th November.

The conference is a great occasion to push governments to adopt a more progressive stance on economic policy conditionality and call on them to put pressure on the IFI to stop tying so-much needed aid and debt relief to harmful economic conditions.

Governmental representatives from Canada, Denmark, Estonia, Finland, Germany, the Netherlands, Sweden and the UK will attend the conference, which is intended to:

 assess the WB’s and the IMF’s current application of conditionality to encourage privatisation and liberalisation and
 explore the possibilities to shift from one-sided conditionality to mutual accountability.

On the occasion of the conference, civil society organisations participating at the conference have drafted a common sign-on statement, which has been already signed by 39 organisations.

CSO Common statement on the Norwegian conference

In 2005 donor governments committed to significant increases in the volume and quality of development aid. A large amount of this is likely to be delivered by the World Bank and the IMF, which are also very influential in the spending allocations of other agencies. However, economic policy conditionality imposed by the World Bank and the IMF on developing countries has harmed development in some of the poorest countries and remains a key challenge if aid effectiveness is to be taken seriously.

We welcome the Norwegian government’s decision to convene a Conference on Economic Policy Conditionality. It provides a unique opportunity to promote vitally important reform to help development in the poorest countries of the world.

We call on our governments to strongly support the process and use this opportunity to formulate positions to end tying much-needed aid and debt relief to harmful economic policy conditions.

Economic policy conditionality - continuing to damage development

When external agencies impose detailed conditions on the finance they provide for developing countries this has a series of unfortunate effects. It:

 Limits the policy space available for developing countries to determine their own policies for poverty reduction, and undermines domestic citizens’ rights in decision making processes and national sovereignty;
 Can delay poor countries from receiving much-needed resources;
 Can increase aid volatility, as resources may suddenly stop flowing if conditions are not met;
 Imposes a significant administrative burden on already over-stretched developing governments; and,
 Has often done more harm than good when it comes to poverty reduction.

There is a growing body of evidence - both official and independent - showing that conditionality has failed. The Bank’s 2005 review of conditionality agreed to the principles of ownership, harmonisation, customisation, criticality, transparency and predictability. Unfortunately, there is little evidence that the Bank is doing nearly enough to change its practice. The Bank claims a reduction of conditionality; however, this is owed, to a great extent, to the fact that interventions that CSO consider conditionalities are not labelled as such by the Bank enabling official statistics to appear more positive than it is the reality.

Recent research conducted by CSOs has found that:

 Aggregate World Bank and IMF economic policy conditions rose on average from 48 to 67 per loan between 2002 and 2005;
 World Bank and IMF continue to put conditions on privatisation and liberalization despite the acknowledged frequent failures of these policies in the past;
 The Bank does not give enough space for governments to define their own policies;
 The continuing secrecy of World Bank and IMF negotiations with borrowing country governments inhibits the development of genuine broad based “ownership” and leaves reform programmes open to the accusation that they have been illegitimately forced on governments by the Bank;
 IMF macroeconomic conditions, especially high interest rates aimed at combating moderate levels of inflation and stringent fiscal policies, impair much needed spending on social and economic development.

From Oslo to greater aid effectiveness

The Norwegian conference provides a unique opportunity for progressive governments in the North and the South to call for an immediate end to tying aid and debt relief to liberalisation, privatisation and other economic policy reforms in poor countries, and to take immediate action to make it happen.

Northern countries are collectively the major contributors to the World Bank’s concessional arm, the International Development Association (IDA); they also have an important presence on the World Bank and IMF Boards.

We urge our governments in the North and the South to show a resolute political commitment to:

 Ensuring the World Bank and the IMF adopt a policy which prevents them from imposing economic policy conditions on poor countries when providing finance and debt relief;
 Phase out harmful economic policy conditionality in WB and IMF lending practice;
 Creating forums for equitable policy dialogue between northern and southern governments based on common commitments to international human rights law and other international agreements and its implications for the goals and modalities of international cooperation and aid;
 Develop a shared strategy for action in 2007/8 (using opportunities such as the IDA 15 replenishment or the upcoming Poverty Reduction Growth Facility replenishment);
 Host a follow-up ministerial level conference on economic policy conditionality in 2007 to build on this initiative.