Zoellick suggested that “one of the problems of the World Bank is that it is called a bank.” Writing in Foreign Affairs, he said, “When it is most effective, the World Bank shares knowledge; develops long-lasting markets, institutions and capacities; and offers diverse financing.”
Less clear is whether the operation at the heart of the World Bank, the profit-making International Bank for Reconstruction and Development, is still relevant.
The IBRD was the original “world bank” set up after World War II to help rebuild infrastructure in Europe. Today, the IBRD uses its AAA credit rating to sell bonds at interest rates close to those of U.S. Treasury bonds and then lends the money it raises to creditworthy developing nations — countries such as China and Brazil.
The IBRD’s resources pale next to those of the International Monetary Fund. The bank loaned about $26 billion in 2011 , for example, a fraction of the $72 billion the IMF approved as a credit line to a single nation, Mexico.
Meanwhile, total capital investments in emerging markets from all sources have topped $1 trillion annually in recent years, and are edging back toward that level after a recent drop. By contrast, the combined net investment of the World Bank and other international development banks and agencies is estimated at less than $20 billion this year, according to the Institute of International Finance.
With interest rates for some developing nations now below those charged to European countries, it is likely that many IBRD clients could borrow elsewhere if the agency did not exist.
Given the changing nature of global finance, there’s no shortage of ideas about how the bank could also change or boost its impact beyond its current role in world finance.
Bank officials, for example, say IBRD loans aren’t just important for the money provided, but also for the technical expertise the bank brings to projects.
Bhattacharya said the bank could become more of a clearinghouse, providing expertise, oversight and information for major infrastructure projects in developing countries, even if those projects are privately financed.
Nancy Birdsall, head of the Center for Global Development, argues in a forthcoming book from Oxford University Press that the bank could become the focal point for projects to cope with climate change or other major risks to the “global commons” — and that the richer developing nations should take the lead in transforming the institution.
Without “a larger and clearer mandate,” she wrote, the bank “will gradually become merely one of many aid agencies dealing with a smaller and smaller group of low-income fragile states.”
Loading...
Comments