The World Bank (WB) and the International Monetary Fund (IMF) are being put on the dock at frequent intervals in Bangladesh and, possibly, in many other developing countries. Recently the IMF has been strongly criticised by a section of our economists, for not releasing the extended credit facility to the tune of USD 1.0 billion and, more importantly, attaching a lot of conditions to the release of the said facility. The economists, interestingly, all of them belonging to one ` specific school of thought', were of the opinion that we should generate the equivalent amount, if not more, to finance our important projects being imbued with the 'spirit of the War of Liberation'. They also felt that the IMF or WB growth prescriptions were always typical and faulty, therefore we should stay away from them.

At this point in time, we possibly need to review the role of the World Bank and the IMF in Bangladesh and examine the validity of the allegations that are being made against these institutions. As a nation, we have behaved in a self-defeating manner on numerous occasions in the past including championing in corruption, political violence, social injustice and economic mismanagement. It is extremely important to ensure that we are not committing a similar mistake by implicating two institutions that are trying to assist a country that is being harmed more by a segment of its own people, including corrupt political parties, dishonest business community, `playing to the gallery' type leaders and, to some extent, by a section of `narrow -- focused' press.

Bangladesh joined the World Bank in 1972, soon after Independence. Early projects financed by the Bank built shelters in cyclone-affected areas and provided urgently needed drinking water. The Bank also worked with others to revive the war-torn country's economy. Since 1972, the Bank's concessional lending arm, the IDA, has financed around 200 projects with loans of about USD 10 billion. In the 1970s, the Bank supported efforts to expand agricultural production, which have helped Bangladesh achieve near self-sufficiency in food production, food supply and develop population and family planning programmes that have dramatically lowered the high fertility rates. From the mid-1980s, the Bank expanded support for more energy projects, particularly in the oil and gas sectors, to reduce the country's dependence on imported energy and speed up development of its own gas reserves. The Bank also supported the government's efforts to encourage private-sector development and to deal with distortions in trade, pricing, credit allocation and interest rates. One of the World Bank's flagship projects in Bangladesh is Jamuna Bridge. The Bank's private sector arm, the International Finance Corporation (IFC), was instrumental in developing privates sector leasing, housing finance, mobile phone, power plant and large manufacturing projects too. The Bank also helped significant improvement in the country's financial sector, through the changes brought in by `financial sector reform project' or 'strengthening the central bank' project and so on.

There is nothing wrong for an economist or a policy analyst or for that matter, the WB or the IMF, to suggest that interest rates should go up or down in demanding economic situations, governance should improve, privatization of state-owned enterprises (SOE) should be expedited, corruption should be eliminated, the poor should have access to credit, financial sector should be more efficient and inclusive or their operating model to be more self sustaining, country should be less reliant on subsidies and the private sector should be strengthened. It was deemed that our economists in question, gradually came to the realisation that the country needed more reform, market liberalization, accountability and transparency in execution of the development projects and independence of the regulatory institutions responsible to drive the future of this nation. So, why are the World Bank and the IMF being made the scapegoats? The reality of the matter is that the concerned economists or at least some of them were deeply involved in and taking credit for influencing the election manifesto or budgetary process of the present government. However, when the prices of essentials have gone up with rising inflation, exports and remittances started showing a downward trend, government bank borrowing is rising to an abnormal level, the national budget is found to be not as effective as was told before, it is nothing surprising that they (under the influence of opportunist group) found it easy to pass the blame on to the World Bank and the IMF, the institutions that never enjoyed cheap popularity.

The World Bank is a vital source of financial and technical assistance to developing countries around the world. The WB is not like a conventional a bank. It is made up of two unique development institutions -- the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA) owned by 185 member countries. Each institution plays a different but supportive role in its mission of global poverty reduction and the improvement of living standards. The IBRD focuses on middle income and creditworthy poor countries, while IDA focuses on the poorest countries in the world. Together they provide low-interest loans, interest-free credit and grants to developing countries for education, health, infrastructure, communications and for many other purposes.

The IMF's primary purpose is to ensure the stability of the international monetary system -- the system of exchange rates and international payments that enables countries to buy goods and services from each other. To maintain stability and prevent crises in the international monetary system, the IMF reviews national, regional, and global economic and financial developments. It provides advice to its member countries, encouraging them to adopt policies that foster economic stability, reduce their vulnerability to economic and financial crises, and raise living standards, and serves as a forum where they can discuss the national, regional, and global consequences of their policies. The IMF also makes financing temporarily available to member countries to help them address balance of payments problems -- that is, when they find themselves short of foreign exchange because their payments to other countries exceed their foreign exchange earnings or at least being challenged.

The Bank and the Fund have their own limitations, they also have track record of, not always serving the interest of the member or borrowing countries, at times due to their 'one-size-fits-all' strategy or not being able to understand the ground realities. This is more applicable to the fund. The Bank is more on the listening and learning road. However, both these institutions are evolving and shifting from their 'age old' stances, with the changing realities in the member countries. Therefore, it is now up to the member countries, why and how they would league with the two institutions and ensure member's interest is better served, rather than being dictated by the institutions. Tying up the release of development support credit with reforms in a specific segment of the economy has yielded very good result for the financial sector in Bangladesh, not necessarily it will yield similar results in every sector. However, discipline brought in by various exercises has helped the country to streamline its many project conception and implementation process as well as brought in overall efficiency in economic management.

India or China, never thought of closing down the World Bank or the IMF offices, rather they make sure, how they would make the best use of these global development institutions. They negotiate well with them on their terms to get the best for their people. Why cannot Bangladesh pursue the same goal?

Source: The Finance/ Bangladesh/ 6th Dec 2011