The World Bank is the largest public institution in the world devoted to ‘development’.
The World Bank lends around US$ 25 billion a year to developing countries. There are two main arms:
- The International Bank for Reconstruction and Development (IBRD)
- The International Development Association (IDA)
The IBRD arm of the Bank lends to middle income and ‘creditworthy’ poor countries. The IDA, meanwhile, was set up in 1960 and is one of the biggest sources of aid for the world’s poorest countries, offering interest-free loans and grants.
Money is lent at a very low interest rate (known as ‘concessional lending’), with half of its loans going to African countries. Repayments can be spread over 35 – 40 years, with a 10 year period before any money needs to be repaid.
Why was it created?
The World Bank and IMF were among the ‘Bretton Woods’ institutions set up as part of efforts to rebuild the international economic system at the end of the Second World War.
The Bank was originally designed to lend money only to particular projects – infrastructural projects like the building of dams and roads and the creation of telecommunication networks, as well as health and education projects.
How is it run?
Day to day business is carried out by over 10,000 staff, based at the headquarters in Washington and in over 100 offices around the world. But strategic decision-making is currently linked to the amount of money that countries have put into its coffers. As a result the US government holds 20 per cent of votes at the Bank, and is represented by one Executive Director.
The 47 sub-saharan African countries, in contrast, have two Executive Directors and hold only seven per cent of votes between them. Support for reforms has been steadily growing but progress is slow. Until there is radical reform, poor countries cannot effectively challenge policies that directly affect the lives of their people.
How has it evolved?
The Bank’s activities have changed over time. In 1980 it introduced ‘structural adjustment programmes’ aimed at helping countries to balance their budgets. Loans under this programme had tough policy strings attached. The stated aim was to ensure that countries’ economies developed in a way that would generate funds to repay its loans. But all too often these policies meant squeezing investment in public services such as healthcare – with devastating results.
For most developing countries the World Bank’s support is set out in Poverty Reduction Strategy Papers (PRSP). These papers are, at least in theory, written by a government in consultation with its civil society and its external development partners, detailing how the government’s policies will promote economic growth.
The Bank has also developed strategies for tackling major health challenges and is a key player in international health initiatives. It was a co-founder of the Roll Back Malaria partnership, where it provides not only finance, but also advice and support for the implementation of projects. Similarly, it is one of the co-sponsors of UNAIDS, the UN specialist body on HIV/ AIDS.
Read our critique about the World Bank.
Last modified: 12/01/2011
