The Role of the World Bank and IMF in Post-Conflict Reconstruction Negotiating Modalities with Special Reference to Iraq Dr. Reinoud Leenders – Clingendael, 21 January 2008 The Role of the World Bank and IMF in Post-Conflict Reconstruction: Overview 1. Post-conflict reconstruction: lessons learned 2. Need for great caution: risks of resuming violence 3. Iraq: reconstruction achievements 4. Role World Bank and IMF in post-conflict reconstruction 5. The WB and IMF in Iraq‟s „Reconstruction Compact‟ 6. Negotiating modalities 7. Questions for discussion Post-Conflict Reconstruction Since 1945: Lessons Learned? • Winning wars is easier than winning peace (Bosnia 1990s) • Preserve basic security as priority (looting /crime El Salvador 1992 >) • No witch hunt against old regime (Germany 1945) • Socio-economic policies as conflict management; no universal ideological blueprints, no „one fits all‟ (..) • Ordinary people need to see their lives improving • Rely on local human resources and local participation Post-conflict Reconstruction: Risks of Resuming Violence 44 % of war-torn countries resume violence in 4 years’ time Iraq reconstruction: the record so far… • • • • Winning war / peace Basic security No witch hunts against ancien regime No ideological blueprints, but reconstruction as conflict management • Lives improving • Local input See: ICG report, Reconstructing Iraq, September 2004. Iraq reconstruction: the record so far…some indicators • Security – Relative improvement 2007, yet refugee crisis • Economic growth – 2008 IMF forecast: 7 % • Socio-economic distribution – Absolute poverty (< 1$/day): 43 % – Unemployment: > 50 % – Child malnutrition: 1/4 • Governance – Transparency Intl‟s „Corruption perception Index‟:Iraq ranked at 178 – only above Myanmar and Somalia – Budget expenditures WB/ IMF: background • Both established in 1945 under „Bretton Woods agreement‟ – IMF: preserving international financial stability – WB: role in reconstruction Europe, Marshall Plan, then infrastructure assistance LDCs • Shifting focus: – 1980s debt crisis – 1990s: SAPs, expanding role in „governance‟ – Late 1990s: conflict/post-conflict reconstruction The World Bank in War and Post-War Reconstruction • World Bank Post-Conflict Unit 1997 • World Bank, Breaking the Conflict Trap: Civil War and Development Policy, 2003. • Paul Collier and Nicholas Sambanis (eds), Understanding Civil War, The World Bank, 2005 (2 volumes). • Post-Conflict Fund, 1998: ¼ of WB clients „post-conflict countries‟ • International donor trust funds including Afghanistan, Kosovo, East Timor, Palestine, Iraq: WB as main coordinator international aid. Criticisms & Flaws of WB/IMF Interventions in Post-conflict 1. IFI‟s own policies (SAPs) may have contributed to civil wars: e.g. Sierra Leone, Serbia and Rwanda 2. „Development‟ aid industry contributed to violence by bolstering patterns of exclusion and state actors benefiting from them (e.g. in pre-1994 Rwanda) 3. Capitalist development: “creative destruction” and social frictions: but no real adjustment to standard reform packages prescribed, blue prints. 4. No real self-reflection as player within conflict situations, both regarding causes of conflict and reconstruction interventions. Selfperception as „a-political‟; shift to politics not acknowledged WB/IMF Role in Iraq’s Reconstruction • 2003: Reconstruction needs assessment • 2003: Iraq Trust Fund management • 2004: Paris Club of official creditors: rescheduling 80% of debt in stages on basis of compliance with reforms: “aid conditionality” • IMF influence on budget & supplementary budget allocations / IMF/WB role in IAMB-DFI since 2003 • WB and IMF‟s own credit facilities: annual „stand-by Arrangements‟, “Art. IV consultations” • May 2007: International Compact for Iraq WB/IMF: Learning lessons of post-conflict reconstruction in Iraq? • Too early to say? WB/IMF direct loans minimal, Iraq Trust Fund only 460m$, only 129m$ spent – Lack of security – WB/IMF staff not in Iraq – Iraqi Gov. doesn‟t spent (only ¼ of funds of Iraq Trust Fund = 85 % of total) • Blue print approach? – Fuel prices down, pensions down, reducing PDS, fiscal policy emphasis, use local input? (market vs positive discrimination), local knowledge WB/IMF? (- Iraq 1979) How to negotiate modalities? • Study proposed measures of WB-IMF in reference to their effects in other post-conflict countries – El Salvador, Rwanda, Sierra Leone, Mozambique • Refer to experience CPA / US-led reconstruction • Capitalize on local knowledge, Discuss WB/IMF proposals/approach publicly • Study and appeal to WB‟s own adjusted approach in context of post-conflict • Team up with sympathetic countries Discussion assignment 2. How can reconstruction & socio-economic policy and expenditure better help improving the security situation? Give clear proposals. 3. What can be feasibly done 4. How can the Iraqi Gov to make sure that feasibly persuade the WB and expenditures on IMF to accept the proposals reconstruction is not lost on of group (2)? How to corruption? Indicate causes of effectively negotiate corruption and propose anti- modalities? corruption measures. 1. In what ways do socioeconomic conditions feed into Iraq‟s security conditions and violence? Give detailed examples.