Sometime later this year, the World Bank Group, as it is now called, will be celebrating its 77th birthday. Created in 1944, as the International Bank for Reconstruction and Development (IBRD), it has been through a number of changes of considerable significance; some are not often recognized by the citizens of the countries who are its main targets of attention. The IBRD’s initial function was to help rebuild the war-ravaged continent of Europe and equally destroyed sub-continent of East Asia. Its financial structure was cleverly designed. While the member countries provided it with its capital, only a small part of it was used for funding the operations. The larger part was kept in reserve to provide comfort to the capital markets from where the Bank obtained money for lending to member nations. This structure allowed the institution to borrow at the rates that would not have been available to the borrowing countries. A small amount was added to the lending rate to pay for the staff at the institution and for other expenses.
Europe and Japan were quickly rebuilt but dozens of new countries relieved from colonial rule arrived on the global scene. Fourteen years after Britain left its large Indian colony, India and Pakistan emerged as independent nations; they also needed development funds they would have to pay at the rates available to Europe, Japan, and East Asia. This way of obtaining external help could not be managed by the new countries. Some of the major World Bank shareholders decided to add another institution to the IBRD. With the International Development Association, IDA, established in 1961, the IBRD became the World Bank Group. The IDA was financed by the rich nations through grants which were lent at a very small rate to pay for its expenses. The IBRD then became the Bank Group, the WBG. Its structure served as a model for a number of regional banks that lent on the same basis as the WBG.
When in 1961, Robert McNamara was appointed president of the WBG, he opted for casting the institution’s lending within a policy framework designed to speed the rate of growth of developing nations and to ensure that a significant part of the WBG resources reached the poorer parts of the population. To achieve that purpose, he created a Policy Planning and Review Department and appointed Pakistan’s Mahbubul Haq to become its head.
I joined the Bank in the Policy Department and was soon appointed to lead the Policy Planning Division. Our main contribution to the Bank’s work was to introduce several policy considerations in developing the projects the institutions financed. We also launched an annual report, the World Development Report, which was divided into parts: a description of the state of the world economy at the time of writing and analysis is on one subject on which the Bank staff has done serious analytical work. Subjects covered in the past fifty years or so include how trade impacts economic growth; why some countries are urbanizing more rapidly than others; differences in the problems and challenges posed by world mega cities; how the developing world’s large cities differ from those in the richer parts of the world; and how can poverty be addressed through government action.
In 1987, the World Bank went through a major reorganization. The main change was to focus economic work not only on global issues but also on the problems and opportunities in individual countries. Nineteen country departments were created of which three were for single countries – China, India and Brazil. I was appointed Director of the China Department – a position in which I remained for more than seven years, from 1987 to 1994. My China experience underscored on important aspect of the World Bank’s way of carrying out its work.
The writer is a professional economist who has served as a Vice President of the World Bank and as caretaker Finance Minister of Pakistan. He can be reached at sjburki@gmail.com
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