Organisations within the World Bank Group of multilateral lenders underestimated implementation challenges and responded to the crisis with “some delay,” according to the Independent Evaluation Group (IEG).
The IEG, an independent body reporting to the Board of Executive Directors of the World Bank rather than Bank management, presented its evaluation of the Bank's activities in a report released this week entitled Word Bank Group Response to the Global Economic Crisis.
While it commended the Bank for demonstrating “preparedness based on its knowledge of poverty impacts, long-term dialogue with country authorities, and ability to expand lending,” it also cautioned that there was a need to strengthen the Bank's ability to act quickly in the event of such crises and its preparedness to carry out financial sector interventions.
The IEG also faulted the private sector arms of the Group, the International Finance Corporation and the Multilateral Investment Guarantee Agency, for, respectively, giving priority to protecting its portfolio and for not producing a significant uptake in crisis response outside Eastern Europe.
Speaking to The Hindu about some of the results of the crisis in India and the impact of the Bank's response Vinod Thomas, Director-General of the IEG, said that in India “the global economic crisis triggered a chain of adverse events, starting with a slowdown in India's exports, which spread to production and investment.”
Overall, Mr. Thomas said, India's growth slowed down across all sectors, with the growth rate falling from a peak of 9.7 per cent in 2006–07 to 6.7 per cent in 2008-09. He said the Bank's Global Economic Prospects Report forecasted India's growth as 8.5 per cent in 2010 and nine per cent in 2011.
In terms of the poverty impact, Mr. Thomas told The Hindu that “even with a quick recovery, the crisis will result in an additional 12 million... living on less than a $1.25 a day by 2015.”
However, he added that during the crisis, the World Bank's 2009-2012 country strategy focused on inclusive growth, infrastructure, and the effectiveness of service delivery. Thus, he noted, even as India became the largest single borrower from the World Bank in fiscal 2010, the Bank earmarked $3 billion to support India's domestic response to the crisis.
Notwithstanding the IEG's criticism, Mr. Thomas lauded the Bank's interventions. He said, “The World Bank Group's response has fitted the nature of the crisis – which called for a fiscal expansion to compensate for sharply declining trade and private capital flows.”