|Contact: Klas Bergman
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WASHINGTON, September 26, 1996 In the midst of implementing a wide-ranging change agenda, and responding to its top priority of increasing development effectiveness, the World Bank last fiscal year launched a series of new initiatives to improve the service and range of products it provides its clients, according to the 1996 World Bank Annual Report released today.
At the same time, the Banks total administrative budget for fiscal year 1996 (FY96) dropped by 3.6 percent; the fiscal year 1997 (FY97) administrative budget, at $1,177.1 million, marks the third consecutive year of a decline in net administrative expenditures in real terms. Disbursements from the International Bank for Reconstruction and Development (IBRD) were up by $700 million to $13,372 million and disbursements from the Bank's concessional lending window, the International Development Association (IDA), increased by $181 million to $5,884 million. IBRD's net income was $1,187 million.
"The Report details a critical period in the history of the World Bank Group, one of transition designed to create an institution that is stronger, more agile, and more effective in response to the needs of its developing country clients," says World Bank President and Chairman of the Executive Board, James D. Wolfensohn, in his Annual Report message.
The report is peppered with examples of new initiatives during FY96:
" Speedy support to Bosnia and Herzegovina with a $150 million Trust Fund established to support reconstruction just three months after the Dayton Peace Accords were signed. The Trust Fund provided resources on IDA-like terms for seven projects in FY96.
" $90 million in emergency assistance to the West Bank and Gaza through the Holst Trust Fund. In addition, the Trust Fund for Gaza funded two loans totaling $60 million on IDA-like terms in FY96.
" Establishment of a joint Africa-World partnership for capacity building just six months after the African Governors requested that the Bank expand capacity building efforts in the region.
" Two new initiatives give borrowers more flexibility in determining the currency composition of their IBRD loans; one permits borrowers to select loans in a single currency for new loan commitments; the other allows borrowers to convert the terms of existing currency-pool loans to the offered currency of their choice.
" To achieve universal primary education by 2010 and attendance by 60 percent of all children in secondary school, the Bank committed to allocate $900 million yearly for girls' education.
" Pakistan and India, with their federal or provincial and state setup, provided scope for decentralizing the delivery of Bank-funded programs. In Pakistan, for example, supervision of the Social Action Project as well as various health and education credits has been undertaken at the provincial level.
" In the transition economies, projects are testing community approaches on ways to reduce the social costs of restructuring. In Ukraine, for example, a pilot project is helping find ways to close uneconomic coal mines safely and to help out-of-work miners find alternative employment.
" In Jordan, an example of broadening the product mix of Bank services was a bond issued by the Government of Jordan with a World Bank partial risk guarantee. The issue was successfully oversubscribed, generating new private investment to improve Jordan's telecommunications services.
" To build stronger partnerships with non-governmental organizations (NGOs) in the field, staff were appointed specifically to work with NGOs in 35 resident mission.
" Organizational changes are helping to focus more clearly on client needs. The country director for the new Mexico department and the country directors for Kenya and Djibouti are now located in their respective countries of responsibility, and the intention is to increase, over time, the number of country directors in the field.
"Increasing development effectiveness is the absolute priority of today's World Bank," states the Annual Report, "for only by increasing the effectiveness of what the Bank does can its goals reducing poverty and fostering sustainable development be met."
The Bank played a pivotal role in developing a strategy to assist the heavily indebted poor countries (HIPCs) during FY96. A joint Framework for Action, proposed by the Bank and the International Monetary Fund (IMF), was welcomed by shareholders at the April 1996 meetings, and they asked the Bank and IMF to forge ahead with this effort for consideration and decisions at the institutions' Annual Meetings in October 1996.
The Debt-Reduction Facility for IDA-only countries helps countries to reduce their commercial debt. In FY96, the facility extended grants totaling $77 million to Albania, Ethiopia, Mauritania, and Nicaragua.
Help for the Poorest
During FY96, assistance to the poorest countries those with a per capita gross national product of $765 or less, totaled $9,883 million $3,556 million from the IBRD and $6,327 million from IDA.
Almost one-third of Banks investment lending during the year was directly targeted to the poor through the Program of Targeted Intervention (PTI). Sixty-three percent of IDA lending was for projects in the PTI, up from 54 percent the previous year.
The PTI projects are helping to increase the productivity of and economic opportunities for the poor, develop human resources, and provide social safety nets. An example is a project in the Kyrgyz Republic which will benefit sheep farmers one of the poorest groups in the country who will earn more as sheep farming is transformed into an efficient and sustainable market-based industry with IDA support.
Seventeen of the 29 adjustment operations approved in FY96 contained specific poverty-reduction measures.
Funding totaling $22 billion for IDA 11 (1997-99) was agreed at the donor's meeting in Tokyo on March 19, 1996. The three-year agreement begins on July 1, 1996 with a one-year interim fund of about $3 billion. For the interim fund, decision-making and procurement will be limited to contributing donors and developing countries. In each of the two subsequent years, all IDA donors agreed to contribute about $4 billion to IDA 11. The remainder, about half of the $22 billion, will come from past donor contributions, repayments of IDA credits, and contributions from the World Bank itself.
Successful development depends on investing in people, ensuring development is environmentally sustainable, and making room for private sector participation in the economy. The Annual Report describes activities in these areas during FY96:
" Investing in education, health, nutrition, and population is one of the fastest growth areas of Bank activities, with lending increasing more than fivefold since the early 1980s to 18 percent of total Bank lending from 1992-96, or over $4 billion per year.
" To support environmental sustainability, the Bank committed $1.63 billion and leveraged another $1.64 billion from other sources for 20 new environmental projects in FY96.
" Bank assistance to sectors in which private sector development is making the most rapid inroads financial, power, telecommunications and information technology, oil and gas, and industry and mining totaled more than $5.6 billion through 51 projects in FY96.
Private Sector Development
The World Bank established a Private Sector Development Group in FY96 to coordinate its overall private sector development strategy. Comprised of senior management from the Bank, IFC, and MIGA, its role is to foster synergy among all private sector activities by coordinating country assistance strategies, facilitating private sector operations that involve two or more Bank Group institutions, developing partnerships with the private sector, and sharing expertise within the Bank Group.
The Bank's focus on private sector development comes together most vividly in facilitating the private provision of infrastructure, the Annual Report says.
Divesting assets through privatization is an essential step in facilitating private sector-led economic growth. But private financing of infrastructure cannot get underway without a credible business climate. Therefore, the Bank is helping its clients develop strategies to "unbundle" infrastructure industries where competition is possible. Where natural monopolies exist, the Bank is helping countries develop economic regulations to protect consumers and provide incentives for efficient supply. One example is a technical assistance loan to Mexico that is providing advisory services in support of private provision of infrastructure.
The Bank is playing a more active role in private sector participation in infrastructure through its expanded partial risk and partial credit guarantee programs. Three guarantee operations totaling $275 million were approved in FY96 including a partial risk guarantee for the privately sponsored Uch Power Project in Pakistan. This complex package involved two IFC loans totaling $115 million, US Export-Import Bank guarantees and direct loans from the Bank of China.
Cofinancing is an important ingredient in the Bank's efforts to stimulate investment in developing countries and an increasingly essential tool in mobilizing development resources. In FY96, cofinancing supported 131 Bank-assisted projects for a total of $8.35 billion. That is about half of all project approved during the year.
About 86 percent of cofinancing came from official sources: 37 percent from bilateral sources and 49 percent from multilateral sources. Japan remained the most important bilateral source in FY96, followed by Germany, France, the UK, and the US. The Inter-American Development Bank (IDB) provided $1.6 billion in cofinancing during the year and remained the Bank's largest multilateral cofinancier.
During FY96, the IBRD and IDA together made new loan commitments of $21,520 million for 256 projects, compared to $22,522 million for 242 projects the previous year. The $14,656 million in IBRD loans, compared to $16,853 million the previous year, supported 129 projects in 45 countries. The $6,864 million in IDA credits, compared to $5,669 million the previous year, supported 127 projects in 49 countries. The FY96 total includes a $168 million loan to refinance overdue charges for Bosnia Herzegovina.
The biggest increase in loan commitments was in the Middle East and North Africa (MENA) region, where 21 projects were approved for a total of $1,595 million, compared to 14 projects for $979 million the previous year.
Lending for electric power and other energy at $3,247 million led all sectors by volume, followed by transportation ($2,773 million) and agriculture ($2,577 million). Twenty-one percent of Bank commitments were for adjustment lending, down from 24 percent last year. This includes $65 million in rehabilitation-import loans and $30 million in debt-reduction loans.
The three largest borrowers from the IBRD were China ($2,490 million), Russia ($1,816 million), and Argentina ($1,509 million). The three largest borrowers of IDA credits were India ($1,301 million), Vietnam ($502 million), and China ($480 million). Just as important to the Bank's clients are small loans, such as the $3.8 million credit to Armenia to help privatize public enterprises, strengthen the banking system, reform the civil service, and improve customs collection.
Non-governmental organizations (NGOs) helped design or implement 111 of the projects approved during FY96.
Benefits to Non-borrowers
Bank loans provide the funds borrowers need to procure goods and services largely from abroad to implement their projects. In FY96, the Bank disbursed $9,457 million to cover specific costs for foreign procurement and some local expenditures: of this, $7,214 million was for equipment, $800 million for civil works, $911 million for consulting services, and $532 million for all other goods.
At the end of FY96, IBRD membership stood at 180, IDA at 159, and MIGA at 134.
The World Bank Annual Report is available for the first time on the World Wide Web.