The current strategy for DFID's partnership with the World Bank was published in September 2004 and covers a three-year period. The objectives of this strategy are to help the World Bank to:
Maintain and improve its focus on country level results;
Strengthen local ownership of poverty reduction strategies and alignment of Bank support for them;
Improve its partnership with donors and other partners in developing countries;
Provide appropriate assistance to support development in difficult environments;
Match its use of financial instruments to individual country circumstances;
Ensure that countries do not build up unsustainable debts which are an obstacle to poverty reduction;
Scale up progress towards the MDGs, by improving service delivery and financing private sector activities that contribute to sustainable development;
Deliver on the commitments it made at the Financing for Development Conference at Monterrey.
A copy of the full strategy has been placed in the House of Commons Library and can be found at:
An end-of-cycle review of the current strategy will be undertaken later this year. This will help determine the objectives that are included in the institutional strategy for the following three years.
DFID reports annually to Parliament on its involvement with the World Bank. The latest report, “The UK and the World Bank 2005”, has been placed in the House of Commons Library and can be found at:
The report for 2006 will be produced shortly.
Negotiations for the 15th replenishment of the International Development Association of the World Bank will commence in March and are expected to conclude within a year. The UK's objectives for these negotiations are being discussed. I will inform the House once they have been finalised.
Close co-operation between the International Monetary Fund and the World Bank improves the effectiveness of their support for poverty reduction and stability. We welcome the External Review Committee on Fund-Bank collaboration established by Rodrigo De Rato and Paul Wolfowitz in March 2006.
This has provided the opportunity to feed in UK views on how they can strengthen co-operation. Our contributions have been based around three themes. The first is to stress that there are important roles and responsibilities for both the Fund and Bank in both middle and low income countries. The second is to highlight areas where the Fund and Bank can make a more effective contribution through joint work. We have identified debt sustainability, financial sector strength, public expenditure management, and economic policy and growth, as the most critical issues. Both institutions also have an important contribution to make in supporting country-led poverty reduction strategies. The third theme is to highlight the need for a strong co-operative culture in both institutions so that there is consistent and effective collaboration in all developing countries. This requires a strong and sustained commitment from the management of the Fund and Bank. The UK continues to engage with the Committee and our international partners to exchange views and provide feedback on the extent to which the Fund and Bank are working together effectively in country. Examples of good and bad practice help to identify how they can achieve more effective collaboration.
The World Bank is recognised as a leader in the field of measuring and managing for results. It was charged under the Marrakech Action Plan with developing a global good practice guide, and has developed an approach which aims to (i) strengthen countries' capacity to manage for results; (ii) enhance the Bank's own effectiveness in results management and (iii) coordinate various efforts at establishing a more results-based approach. The International Development Association (IDA), the Bank's concessional lending arm, was the first international financial institution to introduce a results measurement system (RMS). It tracks both country outcomes and the Bank's contribution to those outcomes. At the country level 14 indicators have been identified for monitoring, covering economic growth and poverty reduction, public financial management, investment climate, infrastructure, and human development. Within the Bank, a steering group has been established to promote broader awareness of the agenda and to identify specific systemic improvements that will enable the results-based system to be effective.
Maintaining and improving the Bank's focus on country-level results is a key objective of the UK's current three-year strategy for the World Bank. It is also one of the performance criteria which DFID is monitoring to assess progress against DFID's 2005-08 public service agreement target for improving the effectiveness of multilateral agencies. We will continue to use every opportunity to promote this and encourage further progress by the Bank. These include discussions in Washington and in our work with the Bank in poor countries. The latest major discussion on the results-based approach was in Washington at the IDA 14 Mid-Term Review meeting in November 2006. The Bank produced a paper on experience to date, noting areas where good progress had been made, and areas were this had been more limited—particularly in respect of developing the capacity of poor countries. The UK, and many other countries, recognised the Bank's commitment to results and acknowledged progress. We also noted that there was still much to do, and that sustained efforts would be required, in a range of areas, to make the results-based approach effective.
The global economy has become increasingly integrated in recent years and as it continues to change, it is important that in both their function and governance the multilateral institutions are modernised to respond to those changes. Through reform the legitimacy and effectiveness of both institutions can be strengthened.
The UK has been committed to the strengthening of developing country say in the governance of the IMF and World Bank for a number of years. The Government have reiterated that commitment in the White Paper on International Development published in July 2006.
Within the IMF, the UK welcomes the first steps towards reform and the timetable for further reform set out in the resolution agreed by Governors of the IMF in September 2006, to be completed, at the latest, by the autumn of 2008. The UK has given strong support and equal weight to both objectives of IMF reform: realigning member country shares to reflect global economic changes and strengthening the voice and participation of low income countries. The UK has been clear that reform must increase the voting share of low income countries as well as that of underweighted emerging market economies and we continue to emphasise this. In particular, the UK believes a stronger voice for low income countries requires a substantial increase in the share of basic votes which are assigned equally to all IMF members. These necessary governance reforms should be complemented by continued modernisation of the IMF’s instruments to ensure its continued effectiveness with the entire membership. To this end, the UK also supports proposals to reinforce the IMF’s crisis prevention role through a new framework for surveillance, with an emphasis on multilateral surveillance, and by expanding the IMF’s range of instruments for crisis prevention.
The 2006 White Paper on International Development acknowledges the critical role which the World Bank plays in providing development assistance to developing countries. It also makes clear that the World Bank must reform if it is to remain relevant in a changing world. Four priorities are identified for the Bank:
play a leading role in providing more long-term, predictable funding for developing countries;
find new ways to work with middle income countries as they still face major development changes and are shaping the wider world;
help tackle the global challenges facing developing countries—focusing urgently on a financing framework for clean energy and adaptation to climate change, and forging a new international framework to help developing countries tackle corruption and improve their governance;
help developing countries obtain more influence in the World Bank, where they are weakly represented on the boards, with voting rights decided by financial contributions. This balance must change. The Bank must do more to support developing country priorities and not impose policy conditions in areas like privatisation and trade liberalisation. And if their members demand it, the Bank should be ready to change how members are represented, and how decisions are made—for example through greater voting rights for poor countries. There also needs to be greater transparency in the way that the World Bank and IMF operate. More World Bank analysis should be disclosed. I am pleased that in the recent discussions on conditionally, the Bank agreed to improve its practice in this area. And the practice of picking the heads of both institutions based on nationality should end—presidents should be chosen on merit.
We are actively pursuing these reforms in collaboration with like-minded partners.