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What's the World Bank up to?
Jamaica Obsever Monday, January 12, 2009
The World Bank, or International Bank of Reconstruction and Development (IBRD), has failed so far - some would say not surprisingly - to adequately support the reform of budget financing and debt sustainability which is at the heart of the macroeconomic strategy of the Jamaican Government.
The World Bank was made aware of the Government's intention to replace expensive bond financing with less costly resources from the multilateral development banks while it was still in opposition. Mr Audley Shaw lost no time after his appointment as finance minister in initiating discussions with the World Bank, Inter-American Development Bank (IDB) and the Caribbean Development Bank (CDB).
As the largest of the three, the World Bank was expected to play the lead role in the consortium. Minister Shaw met with the appropriate vice-president in Kingston and Prime Minister Bruce Golding met with the president of the World Bank in Washington DC. All indications were that the "big bank" would take the lead technically and financially. Inexplicably the Bank has failed to execute the role it is established to perform.
This is all the more regrettable since Jamaica is an ideal case. We are a heavily indebted small vulnerable developing country that is doing all the right things in the extremely difficult circumstances of an unprecedented global financial crisis.
The WB's exposure is so small that the Government of Jamaica has in recent years repaid more than it has drawn down. The other Bretton Wood institution, the International Monetary Fund (IMF) has expressed comfort with the government's macroeconomic policies.
The three institutions have the same data on Jamaica yet are proceeding differently.
The Caribbean Development Bank (miniscule compared to the World Bank) has approved US $100 million over three years. The IDB has committed to a multi-year financing programme and since June approved US$370 million, including US$200 million for the private sector.
In January, the board of the IDB is expected to approve a further US$300 million in liquidity support to be allocated to the private banking sector.
The World Bank is to deliberate next week on a one-shot US$100 million loan. This is an outright failure to carry out its mission. If the Bank can fail to support such a deserving case as Jamaica, it is sending a dangerous signal that could cause panic in the developing countries who are now desperately rushing to the Bank for help.
Jamaica made its approach the Bank before the global crisis and should not be short-changed because of the surge in demand following the global financial crisis. The "Big Bank" is not short of resource though we can't but conclude that it lacks heart and vision. Fortunately the IDB has played the lead role from which the World Bank has unfortunately resiled.
All this begs the question why? As far as we are aware, the political level work was properly done and the Caribbean section of the World Bank has been pushing. The problems may be what the Bank is hearing from its office in Kingston.
In these institutions, the outcome at head office can often be undermined by poor work in the country office. The local World Bank office needs to spend less time on public relations and more on strengthening its technical expertise.
Jamaica Obsever Monday, January 12, 2009
The World Bank, or International Bank of Reconstruction and Development (IBRD), has failed so far - some would say not surprisingly - to adequately support the reform of budget financing and debt sustainability which is at the heart of the macroeconomic strategy of the Jamaican Government.
The World Bank was made aware of the Government's intention to replace expensive bond financing with less costly resources from the multilateral development banks while it was still in opposition. Mr Audley Shaw lost no time after his appointment as finance minister in initiating discussions with the World Bank, Inter-American Development Bank (IDB) and the Caribbean Development Bank (CDB).
As the largest of the three, the World Bank was expected to play the lead role in the consortium. Minister Shaw met with the appropriate vice-president in Kingston and Prime Minister Bruce Golding met with the president of the World Bank in Washington DC. All indications were that the "big bank" would take the lead technically and financially. Inexplicably the Bank has failed to execute the role it is established to perform.
This is all the more regrettable since Jamaica is an ideal case. We are a heavily indebted small vulnerable developing country that is doing all the right things in the extremely difficult circumstances of an unprecedented global financial crisis.
The WB's exposure is so small that the Government of Jamaica has in recent years repaid more than it has drawn down. The other Bretton Wood institution, the International Monetary Fund (IMF) has expressed comfort with the government's macroeconomic policies.
The three institutions have the same data on Jamaica yet are proceeding differently.
The Caribbean Development Bank (miniscule compared to the World Bank) has approved US $100 million over three years. The IDB has committed to a multi-year financing programme and since June approved US$370 million, including US$200 million for the private sector.
In January, the board of the IDB is expected to approve a further US$300 million in liquidity support to be allocated to the private banking sector.
The World Bank is to deliberate next week on a one-shot US$100 million loan. This is an outright failure to carry out its mission. If the Bank can fail to support such a deserving case as Jamaica, it is sending a dangerous signal that could cause panic in the developing countries who are now desperately rushing to the Bank for help.
Jamaica made its approach the Bank before the global crisis and should not be short-changed because of the surge in demand following the global financial crisis. The "Big Bank" is not short of resource though we can't but conclude that it lacks heart and vision. Fortunately the IDB has played the lead role from which the World Bank has unfortunately resiled.
All this begs the question why? As far as we are aware, the political level work was properly done and the Caribbean section of the World Bank has been pushing. The problems may be what the Bank is hearing from its office in Kingston.
In these institutions, the outcome at head office can often be undermined by poor work in the country office. The local World Bank office needs to spend less time on public relations and more on strengthening its technical expertise.
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