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Wind of Change Blowing Through World Bank and IMF

Agencies Seek New Approach to Human Resource Development for New and Old Borrowers

Letter from Washington

by M Syeduzzaman
THERE Is never a dull moment in the World Bank complex In Washington.
Things are happening all the time. The financial year ending in June 1992 has been particularly eventful, the Bank, along with the IMF have been thrust Into the forefront on the global economic scene, and have been deeply involved with concerns about the former Soviet republics. The new President of the bank. Lewis Preston, is completing his first year — In fact, nine month's in the Bank.
The World Bank's lending to the developing countries for the current financial year has fallen far short of targets— about $15 billion compared to programme for 918 billion, and fiscal year 91 actual of 916 billion. It is doubtful if this has ever happened in the Bank's history. Is any part of this attributable to the change in management style? Some arc Inclined to believe so
Questions have also been raised about the Bank's longer-term lending capacity. The agency senior management has tried to attribute the shortfall to three factors—political turmoil in some countries, im plcmcntalion shortfall, and slowdown in the readiness of some countries to proceed with policy reforms. This un expected development led the Bank to organise a review of implementation in consulta tion with senior officials from borrowing countries. A work shop was organized in the last week of May on Supervision of project/ programme Ini plemenlalion. Specifically, the workshop reviewed arrange mcnls made by borrowers for monitoring implementation and supervision, strengths and weaknesses of the Bank's own system of project and programme supervision, and pos siblc ways of improving the World Bank's activities in this
area.
A new budgeting system is being introduced by the new President in consultation with the Executive Board, to be effective in July 1993. The system Is designed Io make it more cost-effective and is based on a three-year planning framework, with retrospective and mid-year reviews.
fn his first year, the new President has made efforts to establish equations with the
staff as well as the Executive Directors who oversee the Bank s activities on behalf of the shareholders A clear pal tern is yet to emerge. Al a recent meeting with some business leaders. Preston Is reported to have referred to the Bank's tendency "to be a bit ar rogant. While some managers have welcomed the system of decentralisation and dclega tion. olhcra view this as abdl cation and weakening of the Bank's operational effectiveness. The equation with the Executive Directors has always been uncertain for Bank President after the departure of McNamara The pre eminence of 0-7 Executive Directors, which was always there, but which has become more obvi ous now has In a way queered the pitch for the President O 7 Executive Directors arc keen to determine the allocation of Bank and IDA resources to d!f ferenl regions/ countries, whereas the developing coun try Executive Directors whal to leave It to the senior man agement. The other dimension of this relationship—authority of the Executive Directors—has been made light of by the Bank President in a recent interview reported in the Washington Post. Recently, the Executive Directors were furious that the President had by passed them in working out an arrangement with the IMF regarding han dling of Programmes for the former Soviet republics Some-Directors challenged the legal basis of such an arrangement without prior Board approval.
Meanwhile. 1.200 legislators and parliamentarians from 26 countries have urged Ihc World Bank President to step up Its activities to reduce poverty tn the work! by In creasing allocations for prt mary education, health care, safe drinking water, and sanl tation. The Initiative is at tributed to US Congressman Tony Hall (a democrat) and Includes 172 Japanese legtsla tors, 309 from the UK. 23 1 from Germany, and 259 from the US Congress.
The Bank President has proposed in the Earth Summit in Rio that donor countries should and 95 billion to the next replenishment of IDA, IDA-10, for investing In envi ronmcntal protection and improvement projects In the world's low-income countries.
IDA 10 Is expected to be operative from July 1. 1993. The Idea was first mooted by the dewfoping-country ministers In the April meeting of the Development Committee, and naturally Mr. Preston's pro posal at Rio has been wcl corned. Reportedly, the donor have agreed in principle to the inercihent, and ft will be discussed further at the meeting of IDA Deputies in July In Ireland. The Deputies have to come to an agreement on IDA 10 by December 1992 — so that It can become operative from July 1993 There are two other conflicting considerations Developing countries desire all additional environmental aid to be channeled through a "Green Fund," whereas the major donors would like to see all such funds channeled trough the Global Environment Facility being
jointly operated by the World Bonk. UNDP, and UNEP— un dcr the World Bank's leader ship.
It is the World Banks membership which Is undergoing significant changes Switzerland has at last bcrom- a member. Twelve former Soviet republics are likely to become members of the World Bank In the next financial year beginning July I, and application for membership has been received from Bosnia Herzegovina. Croatia, and Slovenia. According to one Bank official, when all the pending applications arc professed, the Bank membership will rise to a total of 177. and the Bank will be close to achieving the global participation envisaged at the Breltan Woods Conference.
The Bank is now busy giving final shape to its programme and budget for the next financial year beginning July 1. 1992. A major concern of the agency next year will be to respond to the challenge posed by the former Soviet republics. The Bank management feels that failure on the part of the Bank to respond adequately and promptly could delay the effective integration of these countries into the global ccxm-
omy.
For the fiscal year 1993, the Bank s lending programme is being projected al 920 billion compared to 915 billion to be realized tn fiscal year 1992 IDA programme for next year, which will be the final year of I DA-9, is projected al 86.9 billion, compared to 86.4 bll lion likely to achieved in fiscal vear 1992 In their planning, ti" Bank management Is now a -aiming that IDA-10 lending programme will be the same In real terms as IDA-9, roughly $14 billion SDR. The combined WB and IDA lending programme for fiscal year 1993 is thus projected at about 927 billion, compared to about 921.5 billion for the current year, and Increase of 25 per cent in nominal terms.
To deliver the programme, the Bank management is planning to recruit to recruit
about 350 new staff members, raising the total to 6.125. Ac cording to Bank official, fiscal year 1992-93 will sec the largest number of new borrow ing member countries since thc year 196Os," along with about 15 countries for whom lending will reactivated. The latter Includes such potential countries as Vietnam, Camba dia. Afghanistan. Lebanon. Peru, and South Africa.
In proposing next year's budget, the WB chief has reiterated that the Bank s primary mission remain "sustained economic expansion, market orientation, poverty reduction, human resource development, and environmental protection." Within this, the emphasis will vary for different regions. For Sub Saharan Africa, the Bank will support the major initiative already launched to develop an "implementation culture" for Improving the Impact of its lending programme, along with "policy reforms aimed al restoring and sustaining growth." alleviation of poverty and reversal of environmental degradation. For Europe and Central Asia, where "most countries are eh ther new or anticipated Bank members. special features of strategy will lx- "urgent < co-
nomic reform programmes' with "macroeconomic stabilize tion. systemic change, social safety nets, and human resource and institutional dcvcl opment."
For South Asia. Ihc Bank will continue to address the major development issues of growing population living In poverty, and human resource development. "Structural and sectorial adjustments and Improved macroeconomic and natural resource management’ remain critical to 'sustainable development' fn the South Asia region. The lending approach will reflect this concern.
From July 1992. the Bank is creating a new technical assistance grant facility, named the Institutional Development Fund (IDF). The IDF Is designed to fill gaps in the Bank's tool kit for financing technical assistance for Institutional de vclopmcnt work associated with policy reform; country management of technical oasis tance; and special operational emphasis Initiatives, part feu larfy for poverty reduction, public sector management, private sector development, and environmental manage inent The bulk of IDF grants In expected to go to low In come countries
Russia joined the IMF on June 1, but receipt of financial assistance from ihc Fund call mated at about $4 billion has become uncertain. Fear Is be Ing expressed the Russian may be on the verge of abandoning the Fund programme under pressure from conservative legislators In addition, lack of reliable data on, the Russian economy has become another obstack-. The much advertised 824 billion western aid pro gramme for Russia is critically contingent upon and agreement with the Fund. It Is said. Russia wants some kind of un dcrstandlng with the Fund staff before the July G-7 Summit. An Independent research institute has urged western donors to case the conditions of aid to Russia and the other East European countries for ensuring prompt disbursement. US« officials believe that the IMF and Russia need Io be more realistic about Moscow's ability to pursue economic reforms. and have urged both sides to modify their position in the interest of early agree-
ment But G-7 leaders continue to press Boris Yeltsin to resume reforms IMF resources will he under pressure iinn the Russian programme is un derway In iMn context. Treasury Secretary Brady has urged Ihc Congress to approve US contribution to IMFs quota in crease Funds quota increase involves 812 billton Increase in US quota and the proposal is included In the Ad mln Istra Boris Freedom Support Act. Though the House Foreign Affairs Committee approve the aid bill on June 10. there is no agreement yet by the House leadership on Its consideration by the full House Meanwhile. World Bank professionals and Independent experts believe that, in five years time, the under used oil and gas sector would generate enough resources to finance the reslrue luring of Russian economy
The IMF seems to continue on expansion of Interest beyond its traditional mandate. Managing Director. Michael Camdessus, fn his address at the Rio Earth Summit, urged for an end to "perverse" expenditure on defence and pro lectionlsm. But he went one step more Camdessus said, in n recent Interview reported by .i leading news agency, 'that fear of Communism had formerly been a stimulus for official development assistance," and "there now existed genuine reasons for assistance In the form of environmental protection and. above all poverty alleviation."
Meanwhile, hectic negotiations arc going on regarding restructuring of IMF's Executive Board Switzerland has be come a member of the Fund with a large quota and is cx-pc< ling to scat on the Execu-thx Board. This will mean increasing the number of scuts to 24 from the present level of 23. If that is not agreed upon by the major shareholders, one of the existing director will have to be unseated. Preliminary indications are that in that event a developing country scat may be eliminated involving reordering of some constituency membership and groupings.
The writer, a guest columnist of The Dally Star, note visiting the United Stales, is a former Finance Minister of Bangladesh.