The Conditionality Factor and Public Sector Reform Funding

Posted By Nellie Mayshak on May 16, 2018 | 0 comments

The Conditionality Factor and Public Sector Reform Funding

There’s a term that organizations that fund public sector reform projects use called “conditionality.” The term refers to conditions that a country which will be a beneficiary of funding must meet in order to receive this funding.

There are those who favor conditionality, and those who argue against it.

Those on the favoring side, like the World Bank, argue that without conditions on aid geared to market-oriented policy reform, inefficient, if not corrupt, governments would just be propped up. Conditionality makes development assistance more effective and ultimately boosts the living standards in the recipient countries.

On the other side, detractors point to a host of issues. Market-oriented policies, say some, might promote development, but at the expense of the country’s poor. Others suggest that trade liberalization might spell doom for domestic industries and push unemployment up. And then there’s the concern that the benefits of such policies – like investments from multinational corporations – would only accrue to those corporations and the elites in the recipient countries. I’ve been responsible for helping to implement a range of reform programs. Some involved conditionality, some didn’t. I’ve found that abuses will occur, whether conditionality is a factor or not.

But what really makes the difference to whether reform will take or not is when a country’s leadership has articulated a set of goals or aims that are understood and embraced by its people.

Lithuania, for example, desperately wanted to advance and have its people benefit from a strong and open economy separate from the Eastern Bloc of Soviet dominated countries. The condition of entry? Reform of its public administration infrastructure. The country received Canadian funding, among others to create the necessary infrastructure and achieved the goal. Botswana is another nation that, thanks to strong leadership and a cohesive, invested citizenry, has become one of the best-managed nations in Africa, with considerable standing with the rest of the world. Any funding with conditional strings attached would not have been problematic because they would have been aligned with the country’s goal to write the book on success in Africa.

Then there are countries like Nigeria, which took big loans from the international banking system to improve its public infrastructure system. No one insisted, “Show us what you’ve done with that money,“ so the government didn’t. Change didn’t necessarily take place and Nigeria has ended up owing money to the international banking community with nothing to show for it. Too many emerging nations do not have incentives or imperatives like Lithuania or Botswana. Their leaders are not in a big hurry to make changes. So, while conditionality may not be the best tool for ensuring reform projects take, it’s better than no system of checks and balances at all.

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