September 5, 2000
World Bank President James Wolfensohn said on Friday he expects the Bank to change the nature of its lending activities in the future, reflecting past experience that the conditions set on some loans in the past have been shown to be unrealistic, reports Dow Jones. Speaking in Washington on Friday, Wolfensohn said the Bank now hopes to give the governments of developing nations greater flexibility in handling World Bank money, and therefore greater responsibility for the success of the projects the Bank helps to fund.
The World Bank and the IMF will both face considerable pressure to outline changes to their operating policies later this month when finance ministers and central bankers gather in Prague for the institutions' annual meetings, the story says. Major shareholders, led by the US, want clearer lines of distinction between the Bretton Woods twins, with the IMF focusing on short-term lending for balance-of-payments problems, while the Bank specializes in longer-term development lending and poverty alleviation.
Wolfensohn confirmed that the days of the Bank providing short-term funding for countries facing "liquidity" squeezes were "now finished". Instead, the Bank will tweak the way it offers project loans to countries, removing conditions that handcuff governments into meeting strict targets and conditions. "We discovered that, in some of the project lending we were doing, the conditions were too tight, [whereas] things are dynamic and things change," explained Wolfensohn.
Accordingly, the World Bank is likely to offer larger loans for specific sector-based programs, timed to release money to the country over a period of years. "They'll have fewer conditions, if you like, and more a sense of direction and judgement as you go forward," said Wolfensohn. Under this strategy, the Bank would not tell governments how many schools to build and [where the] best locations [would be], but rather the Bank would be seeking the definitions of broad goals and then devising the best way to achieve them.
Wolfensohn noted that the Bank still has "the cheapest money around" for governments seeking finance for projects that typically don't attract the private sector. While noting that World Bank loan approvals fell to around $15 billion in 1999 from $28 billion in 1998, he said he now expects a "ricochet effect" that will see lending trend up in the next 12 to 18 months.
FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C íŸ 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.
