In June, the World Bank announced record levels of lending with much of the funding for infrastructure projects, where the Bank’s record has been particularly controversial (see Update 41, 36).
Earlier this year, in response to the economic crisis, the Bank promised to substantially increase its lending, particularly to middle income countries (see Update 64). Provisional figures released by the Bank show that it spent a record $58.8 billion in fiscal year 2009 (which ended in June), $20.6 billion more than the previous fiscal year.
The International Bank for Reconstruction and Development (IBRD, the Bank’s arm which lends mostly to middle-income countries) was the main source of the Bank’s expansion, lending $32.9 billion, up from $13.5 billion the previous year. Almost half IBRD lending went through development policy loans (DPLs, see Uodate 66) Concessional lending through another Bank arm, IDA, increased by $2.8 billion to reach $14 billion, of which $2.6 billion was provided as grants.
Most of this cash was raised through the money markets, though the Bank press release claimed that donors have given it an extra $6.8 billion “over and above previous commitments to the institution.” Despite reports that the Bank’s borrowing costs were increasing as governments pumped money into their banking systems, it is still able to borrow at a far cheaper rate than developing countries. While a $6 billion short-term bond issuance in March was expensive, a €3 billion ($4.2 billion) bond offered in May was the cheapest 10 year bond any supranational lender had issued this year.
In Africa, governments are turning to the Bank for emergency support as their public finances deteriorate. In June, the Bank approved $535 million for Ghana: $300 million to support the government’s budget and $235 million for transport. Mozambique is seeking $120 million from the Bank and Fund, and Nigeria and Kenya are in exploratory talks with the Bank for around $1 billion.
Big boost to infrastructure
The Bank has recently announced its intention to increase spending in several sectors, including health (see Update 66), education and agriculture, but the biggest boost is reserved for infrastructure.
Education lending is set to double to $4.1 billion per year, agriculture loans increase from $4 billion in 2008 to $6 billion per year for the next two years, and social protection funding rise from $2 billion to $6 billion per year for the next two years. The Bank also intends to increase its facility for the food crisis (see Update 65) to $2 billion, up from the $1.2 billion it initially earmarked.
Infrastructure, however, accounted for $20.7 billion, over a third of all Bank lending in the 2009 fiscal year. The newly established Infrastructure Recovery and Assets Platform (INFRA) promises $45 billion in infrastructure lending over the next three years, an annual increase of around $5 billion per year. Latin America seems set to be a major recipient. In the year to June, Bank lending to Latin America rose to $17.1 billion, an increase of 70 per cent. The Bank expects to maintain this level of lending in the region and to continue to focus on infrastructure projects and social programmes.
María José Romero, of the Third World Institute based in Uruguay called this a “warning beacon” as “in many cases these are megaprojects with strong social and environmental impacts.” She added that “the solution to the crisis for Latin American countries won’t come as new loans from the World Bank which only benefit transnational corporations”.
With India pushing the Bank to increase the borrowing limit for individual countries, which is currently set at $15.5 billion, and donors appearing to increasingly favour the Bank as their solution to a lack of emergency financing for developing countries, the Bank’s rise looks set to continue.