The main purpose of the World Bank is to promote sustainable economic growth in order to reduce poverty in the recipient countries. This is done by offering loans and guarantees, as well as providing support in the form of analysis and advice. The bank is the world’s largest financier of development aid.
Projects supported by the World Bank can focus on, for example, education, health care, road construction, environmental protection or reforms of the financial sector and public administration.
The Bank works closely with the governments of the recipient countries, but also with non-governmental organizations and with other international bodies such as the International Monetary Fund (IMF), the various UN specialized agencies and regional development banks.
The World Bank’s support for a country is based on an analysis of the causes of poverty in a recipient country. Based on the analysis, the World Bank then, in dialogue with the country’s government, develops a tailor-made assistance program that is described in so-called Country Assistance Strategies (CAS). The help can consist of financial support, advice or technical assistance.
Investments are made on the basis of achieving growth by building competence among representatives of the state and government, creating a functioning rule of law, developing stable financial systems and fighting corruption.
According to six strategic goals developed by Robert Zoellick, World Bank Governor 2007-2012, the work will focus on helping the poorest countries (mainly in Africa), preventing conflicts and supporting reconstruction in failing states, supporting middle-income countries as a majority of the world’s poor live there., safeguard public and public goods (not least the environment), expand cooperation with the Arab world, which is found to be poorly integrated into the world economy, and provide expertise and expertise.
The World Bank lends money to long-term development projects aimed at fighting poverty and creating growth. The bank is involved in approximately 1,700 projects in developing countries.
Middle-income countries can apply for loans from the International Bank for Reconstruction and Development (IBRD), which is part of the World Bank. Middle-income countries include countries with a national income per capita between about $ 1,000 and $ 12,000 a year. The recipient country pays interest on the loan, which is repaid within 15 years. The first five years are usually free of charge. Projects must have a good chance of becoming profitable.
The International Development Fund (IDA), which is also part of the World Bank, provides long-term loans to the poorest countries. The loans are given on very favorable terms, which means that they are virtually exempt from interest and have a long repayment period, between 20 and 40 years, of which the first 10 years are amortization-free. However, the projects financed by IDA must also be considered commercially profitable. Thus, IDA’s lending deviates from pure development assistance activities.
Some countries, especially small island states, which have higher incomes may also borrow from IDA as their credit rating is too low for IBRD loans. Other countries have such a low income that they qualify for IDA loans, but still a high enough credit rating to be able to borrow from the IBRD as well. The latter include India, Pakistan and Indonesia. A total of 78 countries qualified for IDA credits in 2009.
To obtain a loan through IDA, a country must develop a credible strategy for combating poverty, a so-called PRSP (Poverty Reduction Strategy Paper; see also IMF: Progress). At the same time, IDA offers a special loan credit PRSC (Poverty Reduction Support Credit) which is given in parallel with the IMF’s so-called PRGF loan (see IMF: Progress) and which, like the latter, will support various structural and social reforms.
In 2008, the World Bank lent a total of $ 24.7 billion to 298 projects. The IBRD accounted for 13.5 billion, of which a third went to Latin America and the Caribbean and almost as much to countries in Europe and Central Asia. Of the $ 11.2 billion that IDA portioned out, just under a third was grants and the rest loans. Half of IDA’s money went to sub-Saharan Africa and a quarter to southern Asia.
According to commit4fitness, the World Bank works closely with the IMF, not least with regard to the HIPC initiative (see Progress). A 2007 report stated that there is room to strengthen cooperation, not least to better manage crisis situations, coordinate technical assistance and clarify the roles of the two institutions in the work of developing financial sectors. The Bank also works closely with a number of other UN agencies that also work to combat poverty in the world.
In addition to lending from the IBRD and IDA budgets, the World Bank also manages trust funds for assistance to particularly high-priority development needs. These funds are financed outside the World Bank’s own resources, mostly through contributions from about ten countries. The funds include multi-billion initiatives such as HIPC and the Global Fund to Fight AIDS, Tuberculosis and Malaria (GFTAM), as well as a wide range of smaller and more specialized projects.
The World Bank contributes to about 170 regional and global partnerships, often with similar purposes. In 2000, the Bank initiated an international collaboration between educational institutes in developing countries, the Global Development Learning Network. Co-financing of specific projects also occurs.
Technical assistance and research
An increasingly important part of the World Bank’s activities is technical assistance. This is given, among other things, in the form of the economic country analyzes that form the basis for designing aid programs for the recipient countries. Often, certain parts of the loans from IBRD and IDA are set aside for counseling, training and other forms of knowledge transfer. Technical assistance is also provided in the form of training in financial management and project analysis for officials from the member states’ public administrations.
The World Bank’s research forms the basis for how its work is designed and how the Bank prioritises the areas to be supported. The bank conducts a number of different research projects in different subject areas and regions. In addition to country analyzes, regional analyzes are produced each year that address various themes, such as regional trade, income distribution and work to achieve the Millennium Development Goals.
In addition, the bank issues several reports. One example is the annual World Development Report, which analyzes obstacles to development in the world and provides recommendations for how to bridge them. Another annual report is Poverty Reduction and the World Bank, which examines the effects of the World Bank’s efforts to reduce poverty.