Can the World Bank Enforce its Own Conditions?

Author: M. A. Thomas

Source: Development and Change, Volume 35, Number 3, June 2004 , pp. 485-497(13)

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Abstract:

In the 1980s, the World Bank stepped up policy-based lending, making loans conditional on government policy and institutional reforms in the borrower country. In 2002, policy-based lending (or adjustment loans) accounted for 64 per cent of total commitments. Some critics have argued that conditionality has failed because borrowers do not comply with conditions, and that borrowers do not comply because donors do not enforce the conditions, due to their own institutional incentives to lend. Accordingly, they argue that conditionality should be abandoned in favour of selectivity, a strategy in which donors would lend to governments that already have good policies and institutions in place. This article reviews the evidence that has been offered for this ‘enforcement critique’ and finds that it is not sufficient to support the argument. Although the critique is often asserted, and although there is ample evidence of lending pressures, no studies have attempted to determine whether borrower non-compliance is a serious problem, or whether Bank failures to enforce are the principal reason for the failure of borrowers to meet conditions; nor have any studies been carried out to show whether lending pressures are the main reason for the Bank's failure to enforce.

Document Type: Research article

DOI: http://dx.doi.org/10.1111/j.1467-7660.2004.00362.x

Affiliations: 1: Center for Institutional Reform and the Informal Sector (IRIS Center, University of Maryland, College Park

Publication date: 2004-06-01