An odd alliance of forces ranging from anti-trade NGOs to the US Republicans are united in their condemnation of the World Bank. But when I asked the first Finance Minister of Rwanda – who successfully steered his decimated country through the early years of reconstruction and debt relief – which donors were the most helpful, he said without hesitation that the World Bank had been his best partner. There is much spin and posturing in the debate on aid and development but in reality -lateral aid from individual countries is often inefficient, politically manipulative and bureaucratically expensive. World Bank interventions are usually of higher quality and greater effectiveness.
The World Bank was created in the aftermath of the Second World War to support the reconstruction of Europe. It was at the insistence of the Latin American delegates that it also committed itself to development. The bank has a number of separate funding instruments. The International Bank for Reconstruction and Development (IBRD) borrows money very cheaply, because its funding is guaranteed by governments, and lends to middle income countries together with technical assistance. Part of the repayments are spent on helping poorer countries through the International Development Association (IDA) which is also supported by donor governments. Middle income countries can choose to use the World Bank or not and little of the criticism focuses on IBRD lending. IDA will provide $33billion to the world’s 81 poorest countries from 2005 to 2008. Of this amount, about $18billion came from new aid contributions from 40 donor countries including £1.4000million from the UK and the rest from the Bank’s own resources consisting of repayment of previous loans. The money is provided in a mixture of grants – for the poorest – and interest free long term loans over 40 years. The first 10 years require no repayment and then repayment takes place over the next 30 years.
The cause of the most virulent criticism of the Bank is that it supported neo-liberal structural adjustments in the late 80s and early 90s. This is true. The Bank is funded and supervised by governments. In the 1980s the world voted for a series of Thatcherite, Reaganite, neo-liberal governments. The Bank’s policies reflected this. In the later 90s, we had a Social Democratic advance. The Bank’s lending to poor countries was shifted to a requirement that they support programmes designed to achieve the systematic reduction of poverty by providing universal primary education, basic health care, water and sanitation for all and equitable economic growth. As the UK Labour government ceases to be Social Democrat, right wing governments advance across the world and Paul Wolfowitz has become the President of the World Bank there is a danger that the Bank’s focus on poverty reduction may be weakened. But if the Bank were closed down the effects of this shift to the right would be worse. The Bank is the world’s leading development institution which employs many of the world’s brightest development experts. It is the leading centre of expertise and analysis on development. It could be improved but development would be a much less effective effort without the Bank.
One of the great inefficiencies of development is that there are far too many actors. Each of the OECD countries, a large number of UN agencies and many NGOs have their own programmes in the poorest countries. Each has a bank account, reporting requirements and endless missions that take up the time and energy of Ministers who spend more time accounting to the donors than to their own electorates. As we try to shift from an endless series of unsustainable projects to an investment fund used to help countries improve their own institutions, it is the World Bank that makes the best long term analysis and provides a framework around which other donors can co- ordinate. Considerable progress in improving the performance of the Bank was made under Jim Wolfensohn’s presidency. There is more to be done but a weakening of the Bank would undermine the progress that has been made and reinvent development as a series of charitable projects designed to make donor governments popular with their NGOs and wider public.