Foreign Aid

Obama’s plan to override Congressional conditions for US funding of World Bank is overwhelmingly rejected by lawmakers

Brady Yauch
July 17, 2009

President Obama recently received a harsh lesson from Congress after he decided to openly ignore some of the environmental, labour and transparency regulations attached to funds allocated for the  World Bank and IMF. Worse still for the President, the indictment came from both sides of the aisle—with 429-2 voting to negate the recent signing statement.

In the statement [PDF] , Obama said he would ignore provisions in the Supplemental Appropriations Act, 2009 that would force him to “ take certain positions in negotiations or discussions with international organizations and foreign governments, or by requiring consultation with the Congress prior to such negotiations or discussions.” In short, Obama said the provisions in the bill that get in the way of his foreign diplomatic efforts will be ignored.

Lawmakers in the House didn’t take kindly to the statement. The amendment, [another PDF] sponsored by Kay Granger, ensures that all Federal money will, indeed, be used in accordance with the Supplemental Appropriations Act and other bills regarding foreign aid.

“Sending money overseas, and to an organization such as the IMF with no commitment from the Administration to ensure the funds are used properly or will not be given to any state sponsor of terrorism is completely unacceptable,” said Granger [PDF] .

And what, exactly are some of the provisions that the Obama administration wanted to ignore? Well, accountability to start.

In the bill, Congress wanted to make sure that the money being poured into multilateral institutions wasn’t unnecessary at best and wasteful at worst—one of the major reasons the bill garnered such opposition. In order to do so, they put in place a number of provisions calling on the Secretary of Treasury to ensure that the accountability office within the Bank—the World Bank Inspection Panel—was able to both operate independently of Bank meddling and that the panel’s report were afforded ample time for review and comment.

They also put in a provision allowing the Secretary of Treasury to direct the Bank’s Independent Evaluation Group to examine the social and environmental safeguards of Bank projects—ensuring these protections are actually enforced.

But lawmakers also wanted greater disclosure of the Bank’s operating budgets—including expenses for staff, consultants, travel and facilities. In doing so, they called for random evaluations of multilateral projects, detailing these costs.

Obama’s statement would have also ignored some of the environmental conditions attached to the money for multilateral institutions. As part of the bill, lawmakers called for expansion of projects that either promoted energy efficiency and/or were carbon neutral. They wanted the Bank to compile an annual report detailing such environmental programs.

Lastly, the bill sought to mitigate overlapping projects by the World Bank and the IMF. To do so, lawmakers wanted the Secretary of Treasury, the Bank and the IMF to submit a report detailing their activities and any possibly overlap. This, it appears, would have been ignored.

The Obama administration made it clear that by signing the Bill, it didn’t want to be beholden to any of the conditions attached to it. Congress responded with an emphatic [PDF] “Yes you will.”

“I was asked by the administration and worked hard to get that money for the IMF with some reasonable conditions,” said Barney Frank, chairman of the House Financial Services Committee. “The notion that the administration can take the money and pick and choose what it wants to do with the conditions is unacceptable.”

World Bank watchdog Probe International Executive Director Patrica Adams, meanwhile, lambasted the Obama administration for bargaining away environmental standards and transparency rules, saying it would promote more corruption and environmental harm by World Bank lending.

“The US Congress has always been a leader among legislatures in exercising public oversight over these multi billion dollar agencies. To abandon that now would spell doom for taxpayers in the rich countries and victims in the Third World,” she said.

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