Southasia put the following question to regional and international scholars, economists and journalists about how they view the World Bank’s role in South Asia.
Q. What are the long-term aspects of the World Bank/IMF role in South Asian development?
M. R. Sivaraman Former executive director of IMF for Bhutan, Bangladesh and Sri Lanka.
With India emerging as a net lender to the IMF and the government having agreed to participate in its New Arrangements to Borrow, the dynamics of operation of the multilateral institutions in South Asia do not necessarily change. Pakistan, Sri Lanka, Nepal, and Bangladesh are net debtors to the IMF and are under different programs. Afghanistan is also negotiating an extended credit facility from the IMF. None of the countries in South Asia with the exception of Bhutan show any promises to have a trade surplus. They have sizeable deficits on the current account. All of them including India are dependent on the surpluses on their invisibles and capital account to meet their endemic trade deficits. These economies barring India, have multifarious problems that affect the fundamentals of their economies with attendant uncertainties on the balance of payment front. IMF is there to stay in these countries for some time.
As far as the World Bank is concerned, South Asia as a whole will continue to borrow as its capital needs for development are so huge that any additions would continue to be welcomed. In fact the World Bank is proud to announce that India is its largest beneficiary in terms of total lending. This will continue for a foreseeable period as India generating a fiscal surplus is nowhere in sight and the Indian government needs it not so much as a BOP support but to fill the big hole in its budget.
Pakistan also gets large project funding from the World Bank. The Bank and the Fund together committed over a billion dollars to Pakistan to help her out of the flood crisis of 2010.The draconian conditions accompanying the assistance provided by these institutions have been counterproductive over time and the countries’ felt needs in their economic and political environment are rarely kept in view while laying down the conditionalities. Mr. Strauss Kahn tried to change this but he probably did not entirely succeed. The staff deployed by these two institutions to oversee their operations may be brilliant economists but do not have the faintest idea how a political system works and also the complications of grass root level governance problems.
The idea to have an Asian Monetary Fund is dead. Countries like India, China, Taiwan, Singapore, Malaysia, Thailand and Indonesia who have large foreign exchange reserves could possibly think in terms of an arrangement by which they could help their needy neighbors. As the East is rising it is better to sink differences born more out of surface tensions rather than deep rooted animosity and help one another to get out of the economic shackles that are continuing from a colonial past.
Babar Ayaz Senior Pakistani journalist, commentator on economic policies and a communication specialist.
The World Bank and IMF have different roles. So let’s deal with them separately. The World Bank’s basic role in South Asia is going to be much important because it lends mostly for social sector and infrastructure projects. Almost all the eight countries of South Asia, are suffering from dismal investment in social sector like health and education. The infrastructure of all these countries needs heavy investment also because at present the existing road, rail, electricity, water and ports etc. is dilapidated and inadequate. Poor infrastructure is seriously restraining the economic and social growth of all the South Asian countries. However, countries like India where the economy is doing remarkably well may not rely heavily on the multilateral donor agencies. But all other countries like Pakistan which are not generating enough capital required for investment in the social sector and infrastructure need a long term role of the World Bank.
Again barring India most South Asian countries are not in the position to balance their current accounts hence to bridge their current account and budgetary deficit they may continue to rely on IMF funding. But the problem is to meet tough economic conditionalties of the IMF, which may further lead to destabilize the shaky political governments of South Asia.
Barrister MBI Munshi Lawyer in the Bangladesh Supreme Court and author of the book ‘The India Doctrine – 1947-2007.’
I can only speak on the case of Bangladesh but it seems that both the World Bank and IMF already have a reduced role in the country with activities primarily concentrated on a few sectors such as banking reform and supervision, civil society organizations, financial system stability, migrant workers, poverty reduction, madrassa schools and on education generally. These all are areas that have seen significant improvements in recent years but are also highly sensitive issues politically. The government in Bangladesh has in recent times been less reliant on the World Bank and IMF and less interested to listen to their advice. A case in point is the opening of new banks in Bangladesh which is opposed by both the IMF and WB. Bangladesh leans more towards the ADB who tend to help finance important infrastructure projects and is involved with the Asian Highway project and favors connectivity in South Asia. These are issues that appear politically significant for the present government as well as India. It seems clear that where a particular economy is robust and the policies of the WB and IMF are not in tune with the political requirements of the respective government, it will have less influence and involvement in that country. This is probably the same for most of South Asia but then should the WB and IMF pander to the political sensitivities of governments who may one day require their assistance when there is an economic downturn?
Mohiuddin Aazim Karachi-based economic analyst and a regular columnist on economic issues in various regional publications.
Led by India within the region and China in the neighborhood, economic growth in South Asia should remain strong in the long-run. But South Asian economies including India would need to focus more on augmenting energy resources, development of infrastructure and innovation in high-tech businesses, agriculture and industrial production. So, the World Bank’s help would remain critical. Pakistan, Bangladesh and Sri Lanka may also have to battle with balance of payment problems because these countries would find it difficult to compete with India and China in exports and in attracting foreign investment. They would, therefore, continue to seek occasional IMF support to overcome BOP issues.
Safiya Aftab An economic analyst and researcher with Pakistan’s Strategic and Economic Policy Research (Pvt) Ltd.
The IMF is now concentrating on maintaining stability in Europe. Small programs will continue in South Asia, but are unlikely to have a major impact on local economies. India’s influence in the Fund will grow as the country made a loan of $10 billion to the Fund in 2009, which has implications for its voting powers. The World Bank is increasingly moving towards investment in infrastructure – originally its core function. Given that this is a priority need in South Asia, the Bank’s influence may grow.