The banker and the borrower

Published : Nov 25, 2000 00:00 IST

The 'stock-taking' exercise by the visiting President of the World Bank provides intimations of a course correction in the bank's lending priorities.

WORLD BANK President James D. Wolfensohn's eight-day visit to India in November reflected the eagerness of the Bank not to let its biggest customer slip out of its hands. After all, despite the Bank's best efforts, net lending to India is still negative (-$450 million ), and the Bank has undisbursed committed funds of $8.1 billion as on date. Yet Wolfensohn announced that the Bank would increase its annual lending to India by a billion dollars from next year.

At a press conference held in New Delhi towards the end of his visit, Wolfensohn was asked whether the Bank was veering away from funding projects in the social sector. He replied that the Bank was now looking at infrastructure projects - power, roads ( highways, feeder roads and rural roads), water (both drinking and irrigation) and communications. These are areas where perhaps the Bank finds an adequate level of comfort, which is generated by the conditionality of "milestone-based" reforms and restruc turing and enforcement of user-cost recovery.

It is evident that the World Bank chief's visit was not a routine one. A somewhat chastened Wolfensohn admitted that loan utilisation in India was poor and that he had come to 'stock-take' as to why disbursements were not picking up. It would be naive t o assume that such concerns arise from the Bank's commitment to alleviate poverty. His platitudes about the importance of poverty reduction programmes in India notwithstanding, the stock-taking might start a course correction in the Bank's lending priori ties. The Bank's shifting priorities must have been aided not a little by the National Democratic Alliance (NDA) government's risible efforts to present Wolfensohn with ridiculously low poverty figures.

Within the social sector, the Bank's emphasis seems to be shifting towards creating awareness about human immunodeficiency virus/Acquired Immune Deficiency Syndrome (HIV-AIDS). The trend had started a few years ago and the current visit might just confir m it.

Of the total commitments of the Bank in India, 23 per cent each are for rural development and education and health, and 20 per cent for energy. In fact, the Annual Report of the Bank for 2000 reveals that its outlays for South Asia have declined from the 1998 levels for agriculture, education, population control, health and nutrition and social protection, whereas outlays for public sector management, telecommunications and transportation have increased. The combined IBRD (International Bank for Recons truction and Development) and IDA (International Development Agency) loans committed for India for 2000 total $1.8 billion. Gross disbursements during the year amounted to $1.7 million against a repayment of $1.5 billion. Interest paid by India to the Bank in 2000 was $647 million.

Wolfensohn told reporters that of the 79 projects funded by the Bank in India, progress in the case of 13 was unsatisfactory, but he said he was not contemplating their cancellation. The Bank, which used to adopt a top-down approach to most social secto r projects, has in recent times changed tack and now gets feedback from field-level non-governmental organisations (NGOs). Wolfensohn remarked that the Bank went through a learning process and came to the conclusion that those working with the project be neficiaries at the field level were likely to know how best to go about their work.

Wolfensohn was careful to woo the media with all the right sound bytes, although he did do some tough talking with some of the State politicians who lined up to solicit Bank funding for their respective States. A somewhat wistful Wolfensohn repeatedly po inted out that he was not the elected leader of any State in India, but that did not deter him from telling the various Chief Ministers he met as to how they should run their administration. A media kit prominently features fiscal and administrative gove rnance as one of the topics discussed by him with the Chief Ministers. He also acknowledged that he had discussed the fiscal deficit with the Union Finance Minister. He gave his usual homilies on the need to bring the deficit down by cutting subsidies. W olfensohn believes a lender is entitled to give detailed instructions to the borrower as to how to run his business.

Even as Chief Minister after Chief Minister rolled out the red carpet, Wolfensohn ruled out any direct lending to the State governments. He is reported to have advised Maharashtra Chief Minister Vilasrao Deshmukh to privatise the Maharashtra State Electr icity Board. That the MSEB is on the verge of collapse because of its commitments to the hugely expensive Dabhol power project promoted by Enron was glossed over, even as Wolfensohn lectured the State's officials on the only panacea that the Bank has for the ills of the State's power sector - privatise.

In Andhra Pradesh, an eager N. Chandrababu Naidu reiterated his reformist credentials and made a pitch for huge outlays for poverty alleviation initiatives, even as the Left parties staged a demonstration to protest against the Bank's interference in the State's internal affairs. During his press briefing in Delhi, Wolfensohn remarked that Chandrababu Naidu was a reformer all right but he was not the only one.

In Karnataka, S.M. Krishna flaunted his initiatives in tax administration to impress Wolfensohn into sanctioning the Rs.3,000-crore loan that the State has sought for its various projects.

Gujarat Chief Minister Keshubhai Patel sought $1,800 million for various urban infrastructure, water supply and other programmes. In fact Wolfensohn is reported to have regretted the Bank's decision not to fund the Narmada Valley project.

In Uttar Pradesh, he reviewed the progress of the various Bank-funded projects and met the Chief Minister and officials. His visit to Rajasthan was prompted by tourist interests. He was accompanied by his wife Elaine throughout the tour.

AFTER his round of the States, Wolfensohn spent two hectic days in Delhi meeting the Prime Minister, the Finance Minister, and the Cabinet Ministers for Power, Health and Education, apart from K.C.Pant, the Deputy Chairman of the Planning Commission. He is reported to have given a clean chit to the Finance Minister with regard to the sound economic fundamentals of the country and expressed satisfaction over the reforms now on track. He is learnt to have apprised the Prime Minister of his assessment of t he various States and discussed a range of issues, including infrastructure development and information technology and political matters with him.

The only concrete project that seems to have materialised during Wolfensohn's visit is the memorandum of understanding (MoU) signed with NIIT for funding student loans amounting to Rs.400 crores. The Bank's eagerness to provide the developed world with s killed software professionals they desperately need is evident. In the social sector, the Bank is keen to lend to programmes targeted at HIV/AIDS awareness. During his meeting with the Prime Minister, Wolfensohn is reported to have emphasised the need to raise HIV awareness. After all, HIV is no respecter of national boundaries.

Considering all the aspects, Indians cannot be blamed for reacting with cynicism, if not hostility, to the Bank functionaries' visits.

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