Who's 'free riding'? A critique of the World Bank's approach to non-concessional borrowing in low income countries

This paper considers the current proposals by the World Bank to curb the potential for ‘free riding’ in relation to financial support and multilateral debt relief to low-income countries. Measures to address the ‘free rider’ issue will form a pivotal plank in the World Bank’s future strategy towards low-income borrowing members and will also inform some of the International Monetary Fund (IMF)’s policies in this respect. This paper analyses the proposals in light of current trends in development financing policy and practice, particularly the shifting patterns of official and private financial flows to developing countries, and demonstrates the disjuncture between the conceptual approach of the Bank and Fund to the issue of ‘free riding’ and their operational practice over the past two decades. It is argued here that the Bank proposals are less motivated by a concern over the future debt sustainability of their low-income borrowers but by the realpolitik and financial exigencies facing the Bretton Woods institutions today. Consequently, the measures proposed are not only operationally flawed but represent instead new mechanisms to continue binding IDA countries to financing flows – and thereby financial discipline – by the Bank and the Fund during a time where these institutions are struggling to maintain their operational relevance and political legitimacy