U.S. Treasury Calls for Critical Reforms to World Bank Group IAMs

This week, the U.S. Treasury Department issued a report to the appropriations committees of the House and Senate that provides clear recommendations for how the World Bank Group should adjust the budgets and mandates of its two independent accountability mechanisms (IAMs)—the Inspection Panel and Compliance Advisor Ombudsman (CAO). We welcome these recommendations, and urge Treasury as well as Congress to ensure they are implemented in full by the World Bank Board of Directors.

The report rightly points out that the independence of the IAMs is one of their greatest strengths, on which their credibility and effectiveness rely. It also points out that the disparate functions they possess—namely, monitoring, dispute resolution, and advisory services—should be seen as inter-related, and that they contribute to their overall effectiveness when they are integrated properly. Finally, the report provides a clear roadmap for the Bank’s Board as it looks to wrap up a reform process on the Panel and embark on a new review of the CAO.

With respect to the Inspection Panel specifically, the report articulates the position of Treasury on the three outstanding proposals for reform as such:

  1. Robust monitoring of Management Action Plans. The Board needs the capacity to monitor Management’s Action Plans independently. The Inspection Panel should do this on the Board’s behalf, and could be done on a risk-based basis (taking into account the nature and severity of the case).
  2. Independent dispute resolution. In some cases, the issue at hand is not necessarily a problem with non-compliance with Bank policy. Rather, it can be primarily a dispute about a project’s impacts on local people’s lives and livelihoods, and a dispute resolution process mediated by a neutral party would be the best means to address the problem expeditiously. The Inspection Panel, given its independence from Management, could serve as that neutral third party and earn the trust of the complainants, which is an essential component in successful dispute resolution
  3. Inspection Panel eligibility extended. Currently, a project loses eligibility for Inspection Panel review after 95 percent of funds are disbursed. This constraint is the narrowest of all the MDBs and precludes eligibility for some projects for which harms materialize late in the implementation phase and there is still time to correct any problems. Hence, we support extending the eligibility for a period of time beyond the project closing date, as at other MDBs.

With regard to the CAO, the report also outlines preliminary views on how IFC and MIGA should approach the upcoming review, including:

  1. CAO (in its entirety) should report to the Board.
  2. IFC should look into establishing a funding mechanism for redress.
  3. IFC should strengthen engagement with project-affected people, and take a stronger position against retaliation.
  4. Management Action Plans should respond thoroughly to all CAO findings.

In addition to advocating for these additional functions, the report also calls for an increase in the budgets of both the Inspection Panel and CAO for both practical reasons—given the Bank’s stated goal of increasing engagement in fragile states, and to fund new functions—as well as to demonstrate the Bank’s commitment to the accountability process generally.

As the World Bank’s largest shareholder, and one of the strongest advocates for transparency and accountability within the institution, the United States government should exercise its influence through its regular activities as a member of the Board of Directors to ensure these recommendations are adopted. As IDA19 negotiations move forward, Congress should also make clear that these recommendations are priorities for them as they prepare to consider a contribution to the replenishment.