More World Bank Loans Don’t Equal Less Poverty - Groups

26 July 2005 by Emad Mekay


WASHINGTON, Jul 14 (IPS) - World Bank World Bank
WB
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

lending to developing countries rose last year by 2.2 billion dollars to 22.3 billion dollars on the back of renewed borrowing from middle-income countries, the Bank said Thursday.

Most of the money that the Washington-based institution lent came from the International Bank for Reconstruction and Development (IBRD), which raises its funds through the international capital markets. IBRD lent 13.6 billion dollars for 118 projects out of a total of 279 projects that the Bank funded last year.

The soft loan arm of the Bank, the International Development Association (IDA), which is funded by direct contributions from wealthy nations in the Group of Seven (G7), delivered 8.7 billion dollars as no-interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. loans or grants to the world’s poorest countries. This covered 161 projects.

Despite the large figures, anti-poverty activists — long critical of the Bank’s operations in developing nations — charge that more money does not mean better results, especially when the Bank continues to attach counter-productive conditions to its loans.

But the Bank said in its statement that this year, ”overall lending quality also rose”, and attributed it to better preparation, greater selectivity and more effective supervision.

This has been a long-time demand from the United States, the largest shareholder in the Bank, and its sister institution, the International Monetary Fund IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org
. The George W. Bush administration has requested that loans be tied to results on the ground and better oversight of how the money is used in developing nations.

Of total loans, grants, and guarantees Guarantees Acts that provide a creditor with security in complement to the debtor’s commitment. A distinction is made between real guarantees (lien, pledge, mortgage, prior charge) and personal guarantees (surety, aval, letter of intent, independent guarantee). , 15.7 billion dollars went for investment operations, which finance specific projects, such as building roads, oil pipelines or other infrastructure. Investment lending is now more than 50 percent higher than it was in 2000.

The remaining 6.6 billion dollars were for policy-based and development policy lending operations, which aim to influence governments’ economic measures, like privatisation and trade liberalisation.

We are particularly encouraged by the turnaround of two declining trends: the Bank’s financial assistance to middle-income countries, and the volume of investment lending,” said James Adams, a vice president of the Bank.

The Bank gave its lending good marks on success in achieving development goals. It said that loans at risk of not achieving their development objectives declined to 13.5 percent at the end of fiscal year 2005, from 15.9 percent in fiscal 2004.

The Bank now says that ”human development” projects — in education, health and other social sectors — received a high share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. of the total, with loans going to national programmes most relevant to achieving the Millennium Development Goals (MDGs), which seek to half global poverty by 2015 among other aims.

Several groups and critics of the Bank reacted by saying that the Bank’s lending was still not helping improve the quality of life for millions of poor people around the world, and expect failure in achieving the MDGs.

This is absolutely not to be trusted because the Bank has a self interest in showing programme effectiveness and it’s a controversial question right now,” said Doug Hellinger of the Washington-based advocacy group Development GAP.

Effectiveness is one the buzzwords. So they make the figures come out the way they want it to. We know poverty has increased or stayed stable in most of the countries in which the Bank has operated except places like China and India,” he said.

Several experts have also called for independent monitoring and auditing of these loans.

It is now widely recognised that overall World Bank lending volumes and contributions to reducing poverty are often not correlated,” said Manish Bapna, executive director of the Bank Information Centre (BIC), a clearing house of information on the Bank in Washington.

Independent, third-party monitoring of development effectiveness would help assess what real contributions World Bank financing has made to reducing poverty,” Bapna said.

India topped the list of borrowing countries at 2.89 billion dollars, with Turkey coming second at 1.8 billion dollars, followed by Brazil at 1.77 billion, China at 1 billion and Indonesia at 917 million dollars.

India was also the largest recipient of IDA assistance, with 1.1 billion dollars, followed by Vietnam at 700 million dollars and Bangladesh at 600 million.

Turkey was the largest recipient of IBRD lending at 1.8 billion dollars, followed by Brazil at 1.77 billion dollar and India at 1.75 billion dollars.

These numbers and even the spin given to these numbers indicate that the Bank is slowly giving up on reducing poverty, preferring instead to focus on lending for infrastructure projects in (comparatively) richer countries,” said Sameer Dossani, director of the 50 Years Is Enough Network, a watchdog group .

All of the Bank’s large borrowers, India, Brazil, Turkey, Indonesia, Argentina, etc. can and do raise money from private capital markets for their own initiatives, be they poverty reduction or otherwise,” he said.

By region, most of the Bank’s loans went to Latin American countries, at 5.2 billion dollars, followed closely by South Asia at five billion dollars.

Europe and Central Asia received 4.1 billion dollars; Africa 3.9 billion dollars; East Asia and the Pacific 2.9 billion dollars; and Middle East and North Africa 1.3 billion dollars.

Dossani said what these figures show is that the Bank is more effective in moving money out the door, but that it may be offering cheap loans to countries that should not be eligible for them in the first place. He said the Bank is relaxing implementation of it own safeguard policies in order to be more attractive to those countries.

Excessive focus on lending volumes reinforces the view that World Bank staff continue to face pressure to lend and operate in a culture of approvals,” Bapna said. ”If this is the case, it is quite problematic.




Source: IPS News, www.ipsnews.net.

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