External Development Finance and the Multilateral Financial Institutions

The search for ideas which reduce or eliminate poverty has produced a voluminous literature in the post-war period, as an increasing number of former colonial territories became independent states. One recent study has noted that thinking on development has shifted repeatedly during the past forty years.1 For most of the post-war years a large role for the state was the dominant strategy. The current emphasis is on the market-driven or market-friendly model which points to the private sector as the engine of growth. In this model, government’s responsibility is not to manage development in detail, but to provide a stable macroeconomic foundation and ‘to do more in those areas where markets alone cannot be relied upon.’2 Essentially this means improving the social and economic infrastructure and promoting a framework for sustainable development. It also implies that capital spending by the government is a crucial variable. There are areas for which the private sector will not take responsibility.