World Bank conditionality for lending must be in line with the Bank’s policy. In 2004, the Bank abolished its use of prescriptive conditionality—the practice of pushing specific reforms. Following a review in 2005, it adopted the good practice principles on conditionality. These principles stress the importance of country ownership and commit the Bank to ensure that conditions are limited to those critical for the programme’s success and are customised to individual country circumstances. In 2006, the Bank committed to avoiding conditions in sensitive policy areas such as privatisation, unless they are critical to the effectiveness of a programme and there is clear evidence of ownership by the developing country government. The UK has made it clear to the World Bank that we expect all lending to respect the commitments it has made in the last few years.
The World Bank's 2007 report on Conditionality in Development Policy Lending incorporates findings from consultations in eight developing countries with governments and other stakeholders. It also draws on external studies and reports.
The report highlights continued improvements in the bank's practice on conditionality. The average number of conditions per bank policy-based operation in low-income countries fell from 32 in 1999 to 12 in 2006 and in 2007. There has also been a reduction in conditions in “sensitive areas” and the number of privatisation conditions is low. The consultations highlighted that the bank's practice has improved in respecting country ownership and increasing opportunities to debate policy options.
The report acknowledges there is room for improvement and makes further recommendations, notably the need to involve local counterparts more fully in policy formulation and analytical work, and the need to strengthen the use of poverty and social impact analysis by bank staff.
The findings of the report and the bank’s commitment to further improve its performance in this area are encouraging. We continue to maintain pressure on the bank to ensure that it fulfils its commitments on the use of conditionality.