World Bank

Failures of the World Bank

Although the World Bank achieved name and fame for the promotion of development, trade and world peace but its functioning is also subjected to the following points of criticism:

(i) Inadequate share of developing countries in bank’s capital

The share of developing countries in respect of capital resources of the World Bank was not at all adequate. Even after reallocation of share of member countries, the total voting strength of the Third World developing countries came down from 42 to 40 per cent.

Accordingly, more than 50 per cent of the share capital of the World Bank has been controlled by seven developed countries, namely, the USA, the UK, Japan, Germany, Canada and Italy.

(ii) Inadequate volume of resources

The capital and financial resources of the Bank are considered as inadequate for meeting the increasing financial needs of member countries and especially of developing countries.

(iii) Discriminatory treatment

The World Bank has sometimes been discriminating against countries of Asia and Africa but has been found quite indulgent to the countries of Western Europe. Moreover, the Third World countries are also facing serious difficulties in getting loans from the World Bank.

(iv) Higher interest rate

The rate of interest charged by the World Bank from the borrowing countries of Asia and Africa have been quite high and its commission charges are also quite high. Accordingly, the interest charges are quite high in comparison to the the returns generated from its investment.

(v) Insistence on repaying capacity

The Bank’s insistence or repaying capacity of the country before granting loan is highly criticized, as it discourages the member countries from borrowing from the Bank. Rather, the repayment capacity of the member is to judged after the implementation of the project.

(vi) Loans for specific projects

The Bank has also been criticized on ‘he ground that it has been extending loans only for specific projects, neglecting the needs of general development of developing countries.

(vii) Repayment in foreign currencies

The Bank is also criticized on the ground that it insist upon the repayment of loan by the borrower in terms of that foreign currency in which it was advanced. The developing countries sometimes find it difficult to comply with the repayment of loan in terms of either foreign currency or gold.

(viii) No assistance for general welfare

Although the developing countries need considerable amount of funds for general welfare schemes such as education, public health etc. but the Bank’s rule does not permit it to provide assistance for such purposes.

(ix) Loans for agriculture and allied activities

The Bank has been extending loan to the developing countries mostly for agriculture and allied activities but not extending loans for its basic and heavy industries. In respect of rate, most of the loans from World Bank arc related to agriculture, irrigation, power and mining.

(x) Dominations of Western countries

The management of World Bank has been dominated by Western countries. During the last 48 years of its existence not a single Asian, Latin American and African was selected as President of the Bank.

(xi) Interference with sovereignty

The World Bank often interferes with the sovereignty, decision making process and fundamental policy of the borrowing countries of the Third World, which sometimes goes against the wishes of people and long term policy of the country.

However, although the functioning of the Bank has been criticized on many grounds, but it should also be remembered that the Bank has been playing an important role in the implementation of various projects of developing countries as well as for the betterment of weaker sections of society of those countries. Therefore, the functioning of the Bank should be reformed and strengthened further for the greater interests of developing and developed countries of the world.

World Bank

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