Washington, DC — In a new report called "Aid and Reform in Africa: Lessons from Ten Case Studies," the World Bank says imposing conditions to "coerce" African nations to reform in exchange for aid is not effective. "This report shows that 'aid' cannot buy 'reform' in poor counrties that are flatly opposed to it," says Shanta Devarajan, one of the report's co-authors and a World Bank economist. "Without country-ownership of a national development strategy, even the most generous and well-intentioned aid packages will have little or no impact in improving the quality of people's lives."
Work on the report began two years ago "stimulated by African policy makers and European donors who asked us to look into the relationship between aid and policy reform," said David Dollar, Research Manager, Development Research Group for the World Bank, and another co-author of the report, in a briefing Tuesday morning.
The report which examines Ghana, Uganda, Ethiopia, Mali, Tanzania, Côte d'I'voire, Kenya, Zambia, Democratic Republic of Congo, and Nigeria in the 1980s and 90s marks abandonment of the mandatory structural adjustment approach that has defined World Bank and IMF aid to Africa for almost three decades. This approach typically demands devaluation of currencies, tight credit, removal of price controls and import-export restrictions in exchange for Bank and IMF assistance. Sometimes scores of conditions have been imposed. And structural adjustment has been the target of bitter criticism by African governments who charge that the conditions are onerous and destabilizing.
Bank officials say they've seen the light and that assistance policy is being reborn.
"I have always argued, and continue to argue, that a development program must be country-owned, not owned by donors or the World Bank.... When reform is imposed, even as a quid pro quo for aid, it is not sustainable." wrote World Bank President James D. Wolfensohn in an introduction to the report.
"With regard to using structural adjustment to try and force detailed policy change, this report is quite critical of that," adds David Dollar.
However, the report also argues, while foreign aid cannot be used to impose reforms, the right combination of aid finance, policy advice and technical assistance can play an important and useful role in supporting the reform process.
Ghana and Uganda are held up as the best examples of this process. In both of those nations, the report points out, aid flows rose simultaneously with reform. But in a significant qualification, the report acknowledges that the relationship between reform and democracy in Ghana is "complex." It is still not clear whether aid drove reform or reform attracted aid.
The report finds a clearer lesson in Uganda. "A primary lesson to be drawn from the period since 1987 is that ownership of a reform program is critical to its success....Over the last 12 years, many stakeholders have become involved in the broad-based dialogue with government regarding the reforms," the report points out, citing establishment of a Presidential National Forum in which reform issues were debated and more debate in an Economic Council. By contrast, in neighboring Kenya, policymaking seems restricted to a small circle, the report notes.
What is true for both Uganda and Ghana and generally applicable to Africa, says Dollar, is that aid "is also about ideas and advice, and the case studies argue that the advice from the World Bank and IMF and others was quite helpful to Ghana and Uganda trying to figure out what policies to pursue...Reforming governments welcome a modest amount of conditionality. But let me emphasize the word 'modest.'
"There needs to be less emphasis on prescribing exactly the details of exactly how each reform is to be implemented," says Alan Gelb, a chief economist in the Bank's Africa region. "That, largely, is something for a country to decide. But on the other hand we need to move toward a much greater focus on judging the effectiveness with which countries do the things that they commit to do."
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Nigeria, along with the Democratic Republic of the Congo, was cited by the report as a "nonreforming" nation. However, explained Dollar, the time period studied by the report ends before the Olusegun Obasanjo government begins governing Nigeria. "This is research, not a report on Nigeria or any of these countries today."
There are still serious issues surrounding aid to Africa but aid needs to continue, Bank officials argue. "It is painfully ironic that just at the time when many African governments are putting in place effective social and eonomic policies, and committing to reform, development aid is being cut. This is exactly the wrong message for donors to send," says World Bank President James Wolfensohn.
