WORLD BANK FINANCE HAD POSITIVE IMPACT DURING CRISIS

Washington, October 13 (The Hindu)-The Independent Evaluation Group (IEG) has said that World Bank financing to developing countries during the global economic downturn had a “positive impact” on how these countries dealt with the crisis. The IEG is an independent body reporting to the Board of Executive Directors of the World Bank rather than Bank management.

Vinod Thomas, Director-General of the IEG, said that while many developed countries posted post-crisis growth of about 4 per cent, middle income countries recorded close to 8 per cent, and developing countries as a whole 6 per cent.

Touching upon the effect of World Bank finance in India in particular, Mr. Thomas told The Hindu that “India was one of the moderately-affected countries… At the same time, India was a major recipient of Bank resources in the crisis response, using both the International Bank for Reconstruction and Development (IBRD) and International Development Association (IDA) resources.” The IBRD is the middle-income country financing arm for the Bank and the IDA is the Bank's funding arm for low-income countries.

In this context, the average growth rate in India declined by about 3 percentage points from 9.6 per cent in pre-crisis period to 6.5 per cent in the crisis period, Mr. Thomas noted.

In further comments to The Hindu, Ismail Arslan, Senior Evaluation Officer with IEG, said that in its response to the downturn the World Bank had adapted its 2009-12 India strategy towards intensified programme delivery, “with India becoming the largest single borrower from both the IBRD and the IDA in 2009-10”.

He added that the macro-policy response of the authorities was broad-based, including increases in rupee and foreign exchange liquidity, fiscal stimulus, and actions on trade and finance. Given this response, the fiscal deficit deteriorated in fiscal 2008-09, reaching 9.6 per cent of gross domestic product (GDP), Mr. Arslan noted.

Regarding future economic conditions globally, Mr. Thomas said, “With continued global uncertainty and tougher challenges going forward, sustaining performance and getting stronger results on the ground are crucial tasks in India and some of the other middle-income countries”.

He cautioned in particular that IEG evaluations indicated “more difficult macroeconomic situation… stubborn unemployment levels and poverty, and a climate and environmental crisis in the making”.

Yet the positive effect of the crisis-responsive funding bode well for the World Bank's future role, Mr. Thomas said. “This kind of support is a major force in supporting and shoring up the stabilisation of growth. This is a different role, a new role. It's something to be reckoned with,” he said.

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