The World Bank is currently the largest multi-national lending and technical agency dealing with Third World development. As the world~s leading development agency, the World Bank has a wide-ranging mandate, from consolidating loans for large-scale development projects to providing structural adjustment loans and sectoral adjustment loans to developing countries experiencing balance of payments problems.
In the 1970s, under the presidency of Robert McNamara, the World Bank grew dramatically in size and scope. In the 1980s, in large part owing to the debt crisis, the Bank increasingly served as a debt-management institution, lending in some cases as much as 50% of a developing country's portfolio toward structural and/or sectoral adjustment lending. The primary feature of this kind of lending was to restore a troubled economy's debt servicing capacity by urging indebted countries to adopt major economic reforms known as structural adjustment programmes (SAPs).
Over the past decade, the World Bank has come under increasing criticism from a wide range of groups in the North and South. Environmental groups argue that many World Bank projects have had a disastrous effect on the environment. The World Bank often finances large infrastructure projects, including dams, open pit mines, and road construction. In case after case these projects have been proven economically unsound, have destroyed pristine rainforests, rivers and estuaries, and have uprooted the livelihoods of millions of Third World citizens who are affected by them. World Bank-funded development projects have forcibly resettled 2.5 million people since 1986 alone, and will likely uproot another 2.5 million by the year 2000.
Other groups have been critical of the World Bank's policies of structural adjustment designed to assist countries in correcting their balance of payments or debt problems. These programmes have exacted an unacceptable toll on the poor and the environment (see brief on "Structural Adjustment Programmes". Increasingly, these groups have joined together in the 50 Years is Enough Campaign to call for the fundamental reform of the World Bank.
The record of the World Bank in financing environmentally and socially destructive projects, as well as failed adjustment programs insensitive to local realities, is also a serious problem. These failures were brought to the fore in a recent World Bank review of its projects. The Wapenhans Report cited a significant deterioration in the overall quality of project lending. Another internal independent report on the IDA-funded India's Sardar Sarovar dam project noted that the Bank systematically failed to live up to its own environmental guidelines in evaluating and implementing the project.
The IMF often escapes close scrutiny by groups who tend to focus their advocacy efforts on the World Bank. Yet, the IMF has played a very significant, if not more important, role in exacerbating the impoverishment of developing countries. Critics argue that the IMF has strayed far from its original mandate of providing member countries with funds to alleviate short-term balance of payments crises and stabilizing exchange-rates. The IMF is increasingly under attack for its inappropriate role in exacerbating the economic crisis in Africa during the 1980s and for the fiasco surrounding Mexico's recent collapse.
The IMF played a significant role during the 1980s in "bailing out the commercial banks." By providing IMF credits to developing countries, essentially to service commercial debt, the IMF took upon itself the role of "gatekeeper" for creditors, forcing highly indebted countries to adopt SAPs as a condition not only for receiving IMF credits, but as the "stamp of approval" debtor countries needed as a condition for receiving further grants and aid from all donor sources.
By disbursing funds to developing countries in the 1980s to service commercial debt, an most recently to Mexico, the IMF essentially postponed the debt crisis by providing short term funds on very hard terms for what was essentially a structural problem of insolvency which required long-term solutions. It is widely believed that the IMF financed the "recovery" with the wrong resources and the wrong approach. Consequently, the IMF is now in the position of extracting large net transfers of resources, especially from those countries which can least afford it.