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World Bank Corruption Campaign, IMF Reforms Raise Concerns for Developing Countries

Finance ministers from mainly developing countries have expressed concern that the World Bank's anti-corruption campaign may divert resources from poverty relief and attach too many conditions to aid. At this week's annual meeting of the World Bank and the International Monetary Fund, the ministers also pushed the two lending institutions to give developing countries more say in how they operate and to work with the governments rather than tell them what to do.

During the annual World Bank and IMF meetings in Singapore this week, finance ministers generally welcomed plans to crack down on corruption and support good governance in Bank-funded projects.

However, delegates from many developing countries cautioned that anti-corruption efforts should not take the focus off the Bank's purpose of relieving poverty.

India's finance minister, Palaniappan Chidambaram, says the Bank should stick to clear, consistent, and agreed-on governance indicators rather than introduce new conditions for receiving aid.

"The proposal to customize country assistance strategies on the basis of governance grading of a country, including extreme options like break in lending, I'm afraid is bound to hurt the development process in countries that need Bank assistance the most," Chidambaram said.

Representatives of the world's poorest countries say they support the Bank's efforts, but complain that debt relief efforts are already slowing down. They express concern that new conditions might cause further delays in aid.

Ghana's Finance Minister Kwadwo Baah Wiredu says industrialized nations need to fulfill promises made last year to double aid to poor countries.

"We all noted that there has been slow delivery of the pledges and there's little increase also in the amounts of aid to our countries…. There have been a lot of delays and little acceleration of aid to good-performing but under-aided countries. And also little acceleration of flows to fragile state(s)," Wiredu says.

Wiredu said more should be spent on infrastructure development in poor nations rather than on foreign experts visiting the countries and giving advice.

Indonesian Finance Minister Sri Mulyani Indrawati says the era of dispatching teams of experts from Washington to quickly diagnose problems and prescribe solutions is over.

"We need more people on the ground who can work with us side by side at our pace, meeting our deadline, and facing our pressure. Act as a partner, not preachers," Indrawati says.

Indrawati says if the World Bank wants countries to be open to corruption investigations it should be more open. Developing countries have been lobbying for more say in World Bank and IMF decision-making.

The IMF passed internal reforms Monday giving more voting rights to China, Turkey, Mexico, and South Korea to better reflect the economic power of those countries. Argentina, Brazil, Egypt and India were among a minority of countries that opposed the limited increase in voting shares.

Indian Finance Minister Chidambaram said he would have much rather seen all countries have their quotas re-assessed all at once. He says the two-stage process the IMF members approved is a "hopelessly flawed formula."

"The two-stage process will mean that some developing countries will be asked to yield a portion of their quotas in favor of some other developing countries…. Let me say that the 23 countries, many of them large, emerging and well-performing economies that voted against the resolution may have lost the vote but have not lost the argument," Chidambaram said.

Chidambaram says the second stage of reforms, to be negotiated by 2008, should accurately reflect the influence of all the IMF's members. He told the annual meeting the credibility and legitimacy of the IMF is at stake.

IMF chief Rodrigo de Rato has pledged that reforms will go further and said the organization would remain true to its multilateral framework.