More than 40 per cent of parliaments lack legal authority to ratify loans negotiated by government with international financial institutions such as the World Bank and IMF, reveals a joint IPU-World Bank global survey.
Furthermore, almost two-thirds (64%) of parliaments report no involvement whatsoever at any stage of the loan approval process.
The study, entitled Parliamentary Oversight of International Loan Agreements and Related Processes, was carried out as part of IPU’s goal of improving development results by strengthening the accountability role of parliaments.
Involving almost 100 developing countries, it is the first attempt to paint a global picture of parliamentary oversight related to World Bank and IMF lending and related processes - such as the adoption of Poverty Reduction Strategies Papers (PRSPs) and IMF macroeconomic surveillance.
“Parliamentary oversight of country loans is important because loans often come with conditions requiring changes to policy or legislation which may adversely impact the lives of ordinary citizens, as can be seen in the case of fiscal austerity, market deregulation and so on,” says IPU Secretary General Anders B. Johnsson. “MPs should be able to decide if a loan is really needed and consider whether it is a burden on the country’s budget. While financing deals are made with a country’s government, the loan repayments often rest in place long after the government has changed.”
While the majority of parliaments do have legal authority to ratify World Bank or IMF loans, their involvement varies greatly in practice and is often hampered by limited capacities. For example, almost half (47%) of those parliaments are restricted to accepting or rejecting loan agreements in their entirety and only 29 per cent are able to request actual amendments to the loan agreement.
The study found that when parliaments are required by law to ratify loans, 58% of them are involved at some stage of the loan approval process, whilst 90% of these parliaments use the committee system to oversee the loan process, suggesting a fairly high level of scrutiny.
“The report shows that having a well-crafted legal framework for parliamentary ratification of loan agreements strengthens the overall oversight process,” says Johnsson. “Parliaments with existing legal frameworks need to review their own oversight procedures to ensure they are effective and airtight. Those without one should develop one.”
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