The World Bank: Lending In Whose Interest?
The World Bank is one of the most powerful financial institutions in the world.
1944, the Bank.s initial mandate was to provide loans to support European reconstruction
following World War II. Since its early days, however, the World Bank's purview
has expanded dramatically, and it is now active in more than 100 countries.
The World Bank Group is comprised of five branches: the International Bank for
Reconstruction and Development (IBRD), the International Development Association
International Finance Corporation (IFC), the Multilateral Insurance Guarantee
Agency (MIGA), and
the International Center for the Settlement of Investment Disputes (ICSID).
The IBRD, the Bank.s
largest branch, provides loans to developing countries at near-market rates
and raises nearly all of
its funds by issuing bonds on the private financial market. The IDA provides
loans to the poorest
nations at concessional rates, and it is funded by contributions from the U.S.
and other rich country
governments. The IFC and MIGA provide loans directly to the private sector in
countries and for political risk insurance, respectively, while ICSID mediates
investors and governments.
Power and Governance
The World Bank is comprised of 184 member governments. In practice, however,
governments dominate the institution. The United States is the largest shareholder
of the World
Bank and controls more than 15% of the voting shares on the institution.s Executive
Board. As 85% approval is
required for major changes in Bank policy, the U.S. has veto power at the institution.
By comparison, all the
countries of sub-Saharan Africa combined control less than 7% of the vote.
Their [IMF and World Bank] policies have not only failed to bridge the gap
between rich and poor and achieve greater equality, but rather contributed to
a widening gap, the virtual exclusion of an increasing number of the poor and
widespread social disintegration.. --Rev. Dr. Konrad Raiser, General Secretary,
World Council of Churches; Letter to Kofi Annan, June 28, 2000
The World Bank and its partner organization, the International Monetary Fund
(IMF), occupy a
central place in the global economic system. If impoverished countries do not
agree to IMF/World Bank policy conditions, which almost always include austerity
measures and privatization, the IMF can effectively cut the country's access
to credit. Following an unwritten but universally acknowledged agreement, the
World Bank, regional
development banks, and even private creditors will generally not lend to countries
unless they have
received a "seal of approval" from the IMF. This arrangement gives
the institutions tremendous leverage in impoverished countries.
Another important way that the World Bank and IMF have influence over the
impoverished nations is through international debt. For the world.s poorest
nations, the IMF
and World Bank are the largest creditors. Because the institutions are "preferred
countries must pay them back before all other lenders. The external debt burden
Africa has increased by nearly 400% since 1980 to more than $200 billion today.
External debt per
capita for sub-Saharan Africa (not including South Africa) is $365, while GNP
per capita is just
Many nations have already paid their debts time and again. The debt crisis
set in when interest rates skyrocketed and compound interest made repayment
impossible. For example, Nigeria borrowed $5 billion from official and private
creditors, paid $16 billion to date, and still owes $32 billion!
The World Bank and IMF.s Heavily Indebted Poor Countries (HIPC) Initiative debt
program has not provided sufficient relief to enough countries, with only six
from the program as of January 2003, and even these countries are still burdened
levels of debt. Moreover, many countries, including Zambia, Malawi, and Nicaragua,
denied additional relief because they have not undertaken policies of privatization
fast enough. Many countries in Sub-Saharan Africa still pay more to service
their debts to the IMF
and World Bank than on their entire health budget. Meanwhile, the IMF and World
Bank resist calls
from the Jubilee movement for 100% debt cancellation, despite the IMF.s approximately
in gold reserves and the World Bank.s $2 billion profit in 2002.
Structural Adjustment and Policy Conditionality
An exchange for loans, the IMF and World Bank insist that countries undertake
reforms. Some of the policies countries undergoing so-called "structural
adjustment" must enact
• User fees on health care and water, when these
services were previously free;
• Privatization of state-run industries and basic
services such as electricity, water, health, and
• Removing worker protections, large-scale
layoffs, and privatizing social insurance
• Opening markets to cheaper imports, decimating
entire domestic industries; and
• Budget cuts, increased interest rates, and the
restriction of credit which is essential to the
survival of many small business and farmers.
The World Bank and IMF have been promoting these policies for more than twenty
the period since 1980, when the IMF/World Bank had the most power over economic
income per person has fallen by 20% in Africa and grew just 7% in Latin America.
during the previous era from 1960-1980, income per person increased by 34% in
Africa and 73% in
Latin America. Structural adjustment has failed to promote economic growth in
Moreover, non-governmental organizations that were part of a five-year, eight-country
review of structural adjustment policies called the Structural Adjustment Participatory
Initiative (SAPRI) concluded in 2002 that these policies have exacerbated rather
poverty and environmental degradation. Despite the record of failure, the World
Bank and IMF
continue to pursue these policies today.
..Nearly 40 countries south of the
Sahara have over the past two
decades adopted the free-market
reforms . .structural adjustment
programs. in development jargon .
prescribed by such lenders as the
World Bank and International
Monetary Fund. But in the
generation since independence,
sub-Saharan Africa has never been
-- Jon Jeter, Washington Post,
In May 2001, a World Bank adjustment loan to Ghana required that water fees
nearly doubled, and more fee hikes are planned as the system is readied for
privatization. The increases in costs have put clean water out of the price
range of the
poor and have led to cholera outbreaks that have killed hundreds, as people
forced to drink contaminated water.
The World Bank has now renamed its adjustment loans (now calling them "Poverty
Reduction Support Credits" and "Development Support Loans").
But the content of the loans has
shifted only slightly, with heavy emphasis still placed on privatization, trade
private sector involvement. Short shrift is given to the environmental and social
impacts of this type
of lending, which comprised a record 64% of all IBRD lending in 2002.
World Bank Projects and the Environment
The World Bank continues to lend for controversial and environmentally harmful
The World Bank Group has provided $24 billion for fossil fuel projects (oil,
gas, and coal)
since 1992, compared to just over $1 billion over the same period for renewables..
advocacy group Sustainable Energy and Economy Network has also shown that World
financing of fossil fuels since 1992 has leveraged enough fossil fuel production
to generate almost
double the amount of carbon dioxide that was emitted globally in the year 2000,
significantly to global warming.
In June 2000, the World Bank Group joined three of the world.s largest oil
companies to finance the Chad-Cameroon Oil Pipeline in central Africa. The $3.5
billion project is disrupting fragile ecosystems and putting the people and
that depend on them at risk.
Moreover, the World Bank has historically been the largest single source of
funds for large dam construction worldwide. Since its inception, the Bank has
provided almost $75 billion for 538 large dams in 92 countries which have displaced
more than 10 million people from their homes and land, caused severe environmental
damage, and pushed borrowers further into debt. Though lending for large dams
has decreased as a percentage of Bank lending in recent years, the Bank proposed
in 2002 to increase its support for "high risk" water infrastructure
projects such as dams.
Sources for More Information
Cheru, Fantu. .Effects of structural adjustment policies on the full employment
of Human Rights,.
United Nations Economic and Social Council, Commission on Human Rights, 24 February
Friends of the Earth, Environmental Defense, Sierra Club, International Rivers
Action Network, .Not in the Public Interest: The World Bank.s Environmental
International Financial Institutions Advisory Committee (Meltzer Commission),
March 2000. http://www.house.gov/jec/imf/meltzer.htm.
Mkandawire, Thandika and Charles C. Soludo, .Our Continent, Our Future: African
Structural Adjustment,. Trenton, NJ: Africa World Press, 1999.
Structural Adjustment Participatory Review Initiative Network (SAPRIN), .The
Policy Roots of
Economic Crisis and Poverty: A Multi-Country Participatory Assessment of Structural
September 2002. http://www.saprin.org/global_rpt.htm
Weisbrot, Mark, Robert Naiman, and Joyce Kim. .The Emperor Has No Growth: Declining
Economic Growth Rates in the Era of Globalization,. Washington: Center for Economic
Research, September 2000. www.cepr.net/IMF/The_Emperor_Has_No_Growth.htm
World Bank, www.worldbank.org.
50 Years is Enough Network: www.50years.org
A SEED Europe: www.aseed.net
Africa Action: www.africaaction.org
Bank Information Center: www.bicusa.org
Bretton Woods Project: www.brettonwoodsproject.org
Center for Economic Justice: www.econjustice.net
Center for Economic and Political Research for Community Action (Mexico): www.ciepac.org
Center for Economic and Policy Research: www.cepr.net
Development Gap/SAPRIN: www.developmentgap.org
Focus on the Global South: www.focusweb.org
Friends of the Earth International: www.foei.org
Global Exchange: www.globalexchange.org
Halifax Initiative: www.halifaxinitiative.org
Insaaf International (India): http://www.geocities.com/insaafin/
Institute for Policy Studies/Sustainable Energy and Economy Network: www.seen.org
Jubilee USA Network: www.jubileeusa.org
Jubilee South: www.jubileesouth.org
Third World Netowrk: www.twnside.org.sg
World Bank Bonds Boycott: www.worldbankboycott.org