The Rhetoric of Multilateral Foreign Aid. Assessing the Importance of Good Governance as a Lending Criterion of the World Bank

This study presents two areas of good governance and assesses their relevance for the World Bank's lending policy. First, the definitions and criteria of good governance of four multilateral organisations, namely the World Bank, the International Monetary Fund, the United Nations Development Program and the Development Assistance Committee of the OECD are outlined and discussed. A differentiation between a non-political core area and an associated political area of governance is introduced, and the different governance aspects are allocated to them. Building on these findings, the second part of this study analyses the importance of good governance and alternative factors as lending criteria for the World Bank. Several OLS regressions for three cross-sections between 1983 and 1997 show that the different aspects of good governance play only a subordinate role for the allocation of World Bank credits. Only countries reducing their excessive military potential are favoured by the World Bank shortly after the end of the Cold War. Instead, economic and other donor interests, such as length of colonial dependence, increasingly influence the Bank's credit lending policy over time. The results show little statistical evidence for an impact of recipient need considerations. As previous literature has shown, a negative relationship between population size of a country and the share and change of lending is also observed. Further, the World Bank and the International Monetary Fund focus on the same developing countries, whereas the official development assistance of the U.S. is directed to different countries