Promoting policy reforms: The twilight of conditionality?

Abstract

For the past 15 years, the World Bank (often in cooperation with the International Monetary Fund, and sometimes also with bilateral donors) has tried to encourage policy reforms through conditions attached to structural or sector adjustment loans. In the 1990s, however, such loans are a rapidly dwindling portion of the Bank's disbursements. This article examines major reasons for this shift, including increased flows of private capital, democratization, the changing nature of the reform agenda itself, and growing Bank emphasis on ownership. Reduced direct conditionality is likely to be replaced in part by growing selectivity: the results may well be constructive, but will not ease tensions in the aid relationship.