25 September 2007
Some observers are apprehensive about the trend among international financial institutions (IFIs) to focus on fragile states, particularly in Africa, and are concerned that these institutions may wield undue leverage over cash-strapped governments.
During his recent trip to the Democratic Republic of Congo (DRC) to inaugurate a new regional office there, African Development Bank (AfDB) President Donald Kaberuka promised to step up the Bank’s activities in the country as it continues to emerge from conflict. He announced that the DRC would be eligible for increased assistance under the Bank’s new policy on fragile states, which is expected to receive board approval by the end of this month. In his speech, Kaberuka added that the new policy “provides for great flexibility in resource allocation” for so-called “fragile states,” which the AfDB broadly defines as countries undergoing political transition or emerging from conflict.
The AfDB’s new policy, which is not yet available to the public, reflects a growing trend among international financial institutions toward increasing their involvement in fragile states, particularly in Africa. The International Monetary Fund (IMF) recently announced that it will prioritize financial assistance to African countries emerging from conflict, and just last month in the context of its “long term strategy exercise,” the World Bank Group identified fragile states as one of its four focus areas for the future. This emphasis comes despite a critical report released last year by the Bank’s own evaluation unit that gave the Bank’s performance in this area mixed reviews.
These developments have met with concern from some outside observers who are apprehensive about the leverage that these institutions may wield over cash-strapped governments with little bargaining power. While not focused on IFI operations, Naomi Klein’s recent book about “disaster capitalism” raises further questions about who benefits from policies aimed at boosting private investment in such contexts. Just last week, for example, the IMF approved an Emergency Post-Conflict Assistance (EPCA) agreement worth $66.2 million with Cote d’Ivoire, contingent on significant reforms of the cocoa, coffee and oil sectors, and on the adoption of fiscal austerity measures.
Meanwhile, the World Bank’s portfolio in the DRC continues to grow amidst increasing controversy over its emphasis on investment in the natural resource sectors as a key driver of economic growth. Since it reengaged with the DRC in 2001, nearly half of the $2.3 billion that the Bank has committed to the country was approved on an emergency basis, and as such was not subjected to the normal social and environmental safeguard reviews.
The AfDB’s apparent interest in lending to the DRC under its new fragile states policy has also drawn criticism because it remains unclear whether the Bank has sufficient expertise to effectively engage with and monitor its operations in post-conflict countries.
Resources
- Inauguration of the regional office for the DRC and Republic of Congo, African Development Bank, August 2, 2007 (AfDB website)
- DR Congo: AfDB supports economy, PANA, August 6, 2007 (AfricaNews website)
- IMF to prioritize post-conflict countries in Africa, Bank Information Center, July 5, 2007 (BIC website)
- IEG reports increase in funds to fragile states, Bank Information Center, October 3, 2006 (BIC website) (Acrobat PDF 25 KB)
- World Bank’s handling of fragile states “unsatisfactory,” Bretton Woods Project, October 10, 2006 (BWP website)
- Laying the ground for a long-term strategy for the World Bank Group, World Bank, August 22, 2007 (World Bank website) (Acrobat PDF 82 KB)
- The Rise of Disaster Capitalism by Naomi Klein, The Nation, April 15, 2005 (Naomi Klein website)
- The Shock Doctrine: The rise of disaster capitalism by Naomi Klein, 2007 (Naomi Klein website)