The IBRD is the formal name of what is commonly called The World Bank which is different from The World Bank Group comprising of these specialized agencies: International Development Association (IDA), International Finance Corporation (IFC), Multilateral Investment Guarantee Agency (MIGA) and International Center for Settlement of Investment Dispute (ICSID). All of these institutions represent the financial arm of the United Nations system created to bring financial stability to the World's financial system.
For our purposes, however, we will limit the focus on the International Development Association or IDA which is the soft-loan or concessionary window of the World Bank relevant to the discussion. In The Gambia, as in most countries, what we refer to as the World Bank is actually the IDA. The IBRD is the World Bank. IDA offers loans, otherwise referred to as credits, to members on terms so low that it is usually referred to as 'free money' The rates charged are appropriately referred to 'service charge' and not interest on loan. By contrast, the World Bank or IBRD issues loans as a higher interest rate - but still subsidized - for middle and higher income countries. The Gambia is not eligible for IDRB loans and so are all sub-Saharan African countries with the exception of a few high GDP countries like South Africa, Gabon, Equatorial Guinea.
Last week, it was reported that The Board of Directors of the World Bank (read IDA Board) approved a $5 million grant to support The Gambia's public sector financial management's ability to gather statistical data, and upgrades it national energy policy. This announcement prompted questions as to why if The Gambia is doing so poorly in managing its economy as claimed by me and others why is the World Bank continuing to extend assistance to The Gambia. They, therefore, deducted or reasoned that if financial support is still forthcoming then The Gambia and Jammeh's regime is doing fine on the economic management front. Not necessarily, and I will explain why.
The World Bank and the International Development Association essentially and for all practical purposes operate like regular commercial banks with a couple of significant differences (i) you can bank with your local commercial bank and not be a shareholder, and with the World Bank and IDA you must be a shareholder to bank with them and (ii) IDA is not profit-driven but economic development-driven. The Gambia is a shareholder, however small the shareholding. Gambia is a member of a constituency that has a representative on its Board of Directors on a rotational basis. America is the single biggest shareholder and thus has a bigger say and influence on the Boards that govern these institutions. The IBRD operates profitably and subsidies the IDA which, in turn, is not set up to generate profit but to help countries like The Gambia move up the economic development ladder from low to middle income. The idea being the more developed its economy, the better a provider it will be to its citizenry, and a better bank customer Gambia especially when it becomes IBRD eligible when Gambia will have to pay interest on its loans.
Unlike the IBRD, the IDA was not meant to be a profit generating organization ( but not a revenue loser either). Its resources are contributed entirely by developed world, with the US, Japan and Western Europe contributing the lion's share during Replenishments which occur every three years or so. Like every bank, your loan repayment record or creditworthiness is your passport to access to more loans. Therefore, as long as The Gambia meets it loan obligations, it can count on fiancial support - either credit/loan or grant - from the IDA and other donors. Even when The Gambia is in default, as member and shareholder, it cannot be denied financial support to help it back to being a member in good standing. The particular World Bank story that triggered the discussion was not a credit ( loan ) but an outright grant which means it will not be repaid. But look at what the grant is for; to help the public sector management arm of government improve its data collection capabilities, and also to help government updates its energy policy. If you will recall, the regime came under heavy criticism from the sister organization of the Bank, the IMF, for the continued weakness in its data collection abilities. The grant, even it was not in direct response to the Fund's recent observation, its approval will certainly help address this critical issue facing the public sector.
The IDA, as well as the AfDB, has emergency assistance grant funds earmarked for not only natural disasters like drought, floods, insect invasions etc. but also for countries that have defaulted and are in arrears on their loans/credits. Even at the height of the Liberian and Sierra Leone civil wars, these external agencies continued to help the local population using unorthodox methods of getting assistance to where it is most needed. I am citing these instances only to illustrate that financial assistance can take place in the absence of poor governance conditions and in most austere and hostile environments. And the receipt of grants, and even loans and/or credits is not necessarily a true barometer of the human rights record and/or the economic management performance of a shareholder - the main reason I am an avoid critic of both the Fund and the Bank for not realigning these factors to reflect more closely to what obtains on the ground, especially in the areas of democracy, human rights and the rule of law.
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The IDA, as well as the AfDB, has emergency assistance grant funds earmarked for not only natural disasters like drought, floods, insect invasions etc. but also for countries that have defaulted and are in arrears on their loans/credits. Even at the height of the Liberian and Sierra Leone civil wars, these external agencies continued to help the local population using unorthodox methods of getting assistance to where it is most needed. I am citing these instances only to illustrate that financial assistance can take place in the absence of poor governance conditions and in most austere and hostile environments. And the receipt of grants, and even loans and/or credits is not necessarily a true barometer of the human rights record and/or the economic management performance of a shareholder - the main reason I am an avoid critic of both the Fund and the Bank for not realigning these factors to reflect more closely to what obtains on the ground, especially in the areas of democracy, human rights and the rule of law.
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