The Role of the World Bank and IMF in Post-Conflict Reconstruction

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The Role of the World Bank and IMF in Post-Conflict Reconstruction: Overview. 1. Post-conflict reconstruction: lessons learned2. Need for great caution: risks of resuming violence3. Iraq: reconstruction achievements4. Role World Bank and IMF in post-conflict reconstruction5. The WB and IMF in Ir

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The Role of the World Bank and IMF in Post-Conflict Reconstruction

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1. 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

2. 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

3. 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

4. Post-conflict Reconstruction: Risks of Resuming Violence

5. 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

6. 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

7. 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

8. 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.

9. Criticisms & Flaws of WB/IMF Interventions in Post-conflict

10. 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

11. 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)

12. 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

13. Discussion assignment

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