Responses: Peter Bakvis - Director, International Trade Union Confederation (World Bank)

1. a) The World Bank appeared to respond rapidly in providing emergency assistance to several LICs in 2008 as the food and fuel price crisis attained its peak in mid-year. The Bank created its Global Food Crisis Response Programme (GFRP) in May 2008.  Some of the funds allocated towards the GFRP have since been reallocated to the more recently-created Vulnerability Financing Facility, which has a broader mission to channel funds to those most affected in the LICs by the twin food and global economic crises.  As with IMF assistance to the LICs, the modest level of support is the most important criticism to be made of the assistance.  In the first fifteen allocations made by the GFRP until September 2008, the average grant or zero-interest loan was US$9 million.  These were mostly used for seeds, fertilizers and nutrition programmes.  The World Bank later allocated larger loan amounts to some countries for longer-term agricultural development and social protection improvements, but only five countries received amounts over $100 million under the GFRP, and some of these were in the form of interest-bearing IBRD loans. 
   
   b) The World Bank announced in July that during its 2009 fiscal year (ending 30 June) it had made financial commitments representing “a 54 per cent increase over the previous year [in] responding to the needs of countries hit by the global financial crisis, with strong focus on initiatives to protect the most vulnerable in the poorest countries”.  In fact, by far the largest jump in lending took place in the non-concessionary division of the Bank, the IBRD, where financial commitments rose from $13.5 billion in 2008 to $32.9 billion in 2009.  The increase in the concessionary IDA, which lends to the LICs, was much more modest: from $11.2 billion to $14.0 billion.  It may be noted that part of the increase is explained by “front-loading” of payments, i.e. countries that receive additional assistance from the IDA now will receive less later on.  A substantive increase in non-concessionary loans and grants from the World Bank to the LICs will require additional donor contributions.  The G20 has not yet made a firm commitment to this increased financial aid.  The London G20 summit statement instead called for “voluntary bilateral contributions to the World Bank’s Vulnerability Framework”.
   
2. a) As noted, the main impediment to responding to the needs for additional support to counteract the impact of the food and economic crises has been lack of financial resources.  In order to focus assistance on the poorest, the World Bank in some countries has supported the dismantling of general price subsidies for basic foodstuffs in favour of more “targeted” transfers to low-income households.  This kind of targeting can pose various kinds of difficulties.  They sometimes lead to significant hardships for people who are considered to be just above the cut-off point of eligibility to benefits focussed only on the poorest.  Many poor urban workers and their families are in this category. 
   
   b) Contrary to subsidized basic foodstuffs that are generally available, targeted programmes often result in many needy individuals being deprived of all assistance because they are completely left out of transfer programmes.  Usually it is the most vulnerable and disadvantaged, particularly women and girls, who “fall through the cracks” in this manner, because of deficient administrative capacities which are all too frequent in the LICs.  In a recent analysis, the UNDP’s International Policy Centre for Inclusive Growth noted that conditional cash transfer programmes that had successfully contributed to poverty reduction in middle-income countries such as Brazil and Mexico were reaching a much smaller percentage of the extremely poor when applied in LICs.
   
   
3. a) The emergency loans granted by the World Bank under its GFPR and Vulnerability Framework Facility have less conditionality than typical loans.  The reduction of conditions is one main factor that has allowed the Bank to provide its financial assistance more quickly. That is not to say that there are no conditions.  A GFPR loan granted to Burundi in August 2008, for example, required the government to carry through with the privatization and liberalization of the coffee sector despite the food price crisis situation that makes the condition particularly questionable.  Nevertheless, the Bank is to be commended on the looser conditionality in most of these emergency loans and should be encouraged to make it a permanent feature of World Bank lending. 
   
   b) As with the IMF, the World Bank has been slow in following through on several commitments to reduce policy conditionality in its non-emergency loans.  It recently carried out consultations on its development policy loans (formerly called structural adjustment loans) in seven countries, during which civil society representatives, and governments in some cases, faulted the Bank for excessive conditionality.  The World Bank should ensure that its financial assistance responds to the most important needs and complements interventions by other agencies by engaging in consultations with all “stakeholders”, namely civil society organizations, including trade unions, before the planned assistance is finalized.
   
   
4. a) Private-sector companies around the world have suffered from the global financial crisis and from the practices of the private financial institutions that were root causes of the crisis.  The private sector in the LICs has been particularly vulnerable because of the limited availability of private credit in these countries, with the financial institutions involved imposing particular conditions on producers of goods and services in the LICs. 
   
   b) The availability of affordable credit is of primary importance for the economic recovery of the LICs as much as for countries at other levels of development.  We note that the World Bank’s private-sector arm, the IFC, has developed a Global Trade Liquidity Programme to finance international trade contracts in developing countries with the aim of thereby helping to reverse the decline in trade flows.  It would be just as important for the IFC to ensure that affordable credit is made available for firms in the LICs that produce for the domestic market.  These firms should be assisted by the IFC to adopt strategies that maximize employment creation and avoid job reductions so as to contribute as much as possible to countries’ economic recovery efforts.