Bank President James Wolfensohn spent much of the Bank Annual Meeting distancing his institution from its sibling, insisting that it is not a “second level IMF” and does not provide bail-out funds. This was contradicted by the announcement that the Bank has created new Emergency Structural Adjustment Credits to release funds quickly for structural reforms and safety nets in response to crises. They will charge higher rates of interest than usual Bank funds and must be repaid in 5 years with a 3-year grace period.
The Bank’s role has been in question since it contributed to bail-out packages in East Asia, in which the IMF took the lead in designing banking sector structural reforms. Despite Wolfensohn’s insistence that the Bank deals with social emergencies and longer-term structural reforms, a larger role in emergency lending is supported by the G7. The Bank is close to its lending limit and money used for emergency lending will mean less for long-term development. Wolfensohn insists that the Bank will not lower its reserves ratio so that it can lend more.