This report is prepared in the light of the statement of the current Norwegian Government Declaration (the Soria Moria Declaration) that Norwegian aid shall not support programs that are made conditional on liberalization and privatization. The main purpose is to evaluate to what extent the World Bank and the International Monetary Fund (IMF) still support such programs, to what extent they have put undue pressure on governments to privatize or liberalize, and to what extent they follow their own recently published guidelines. The report makes no attempt to assess the soundness of privatization and liberalization policies, or the consequences of privatization and liberalization policies.
The report was prepared by a team of three consultants in Norway, and one in each of the following countries: Bangladesh, Mozambique, Uganda and Zambia, with support from Norway’s embassies in the respective countries.
The report has three main parts. The first is dedicated to conceptual clarification. We define conditionality as the application of specific, pre-determined requirements that directly or indirectly enter into a donor's decision to approve or continue to finance a loan or grant. We note the different use of the concept by the International Financial Institutions (IFIs) and Non Governmental Organizations (NGOs) and conclude that their disagreement about current conditionality practices is partly attributable to their different understandings of the concept.
The second part consists of a review of recent studies on the above mentioned issues, including those conducted by the IFIs themselves, and those undertaken by NGOs, other international organizations and independent academics. We discuss points of consensus as well as divergence, and point to strengths and weaknesses in their methods for data collection and their basis for drawing conclusions.
The third part consists of material collected specifically for this report. This includes a sectoral review of current IFI strategies in the areas of utilities, social sectors (health and education) and trade. It furthermore presents a brief quantitative review of recent PRGFs. However, the main part of the findings consists of case studies of recent IFI programs that to varying degrees support privatization and liberalization in Bangladesh, Mozambique, Uganda and Zambia.
The main findings may be divided into two groups. The first relate to the extent to which the IFIs still convey strong policy preferences in favor of privatization and liberalization and whether they still use conditionalities to promote these preferences in borrowing member countries. A main finding from the sector reviews as well as the cases is that a narrow focus on privatization and liberalization has been replaced by a broader view regarding institutional reform and complementary policies. However, the agenda has changed more with regards to social policies and utility reform than trade, where the basic thrust is still towards liberalization. There also seems to be less of a change in the policies promoted by the IMF than those promoted by the World Bank.