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Bank Group activity

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
September 1975
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Record expansion of Bank role in past year

In fiscal 1975, the Bank and IDA greatly expanded their lending to developing member countries. Bank lending and IDA credits both set records, as did disbursements, borrowings, and net income.

Lending by the Bank was $4,319.65 million; in fiscal 1974 it was $3,218.4 million. Commitments by IDA totaled $1,576.15 million, as against $1,095.2 million in fiscal 1974, the previous record year.

Other record highs were Bank net income—$275 million, borrowings—$3,510 million, and disbursements by the Bank and IDA combined—$3,027 million. The net income figure was up 27 per cent over last year, borrowings were 89 per cent above fiscal 1974 totals, and disbursements were up a total of $783 million. The year was marked by a continuation in the shift of Bank borrowings toward placement with governments and governmental agencies, and by a further sharp rise in participation by petroleum exporting countries in the financing of the Bank.

Purchases of World Bank issues by central banks, governments, and governmental agencies in fiscal 1975 totaled the equivalent of $2,654 million, equal to 76 per cent of total borrowings in the period. Borrowings of $1,984 million from petroleum exporting countries were up $1,419 million over fiscal 1974 and accounted for 55 per cent of the year’s marketings.

The Bank and IDA continued to expand their assistance to lower income countries with annual per capita incomes of $200 or less; the expansion was in line with the policy of providing more assistance to the poorest countries and people. Their needs took on additional urgency in a year during which their problems were exacerbated by economic events beyond their control. The poorest countries accounted for 38 per cent of total Bank and IDA commitments as opposed to 31 per cent in fiscal 1974. In the case of IDA alone, such countries accounted for 84 per cent of commitments.

Agriculture accounted for a record 32 per cent of all commitments (it was 22 per cent in fiscal 1974); lending in the Bank’s “traditional” sectors—power, transportation, and telecommunications—continued to decrease as a proportion of the whole (29 per cent in fiscal 1975, compared with 43 per cent in the previous year).

More than half of all Bank and IDA operations for agriculture—involving commitments of nearly $1,000 million—were for rural development projects designed specifically to increase the productivity of the rural poor. It is estimated that more than two and one half million families will benefit directly from fiscal 1975 Bank—assisted rural development projects.

World Bank loans approved during fourth quarter of fiscal 1975(ended June 30, 1975)
Amount
CountryPurpose($ millions)
Algeria (2)DFC, rural development48,0
BoliviaRailways32.0
Brazil (2)Steel, earth works118.0
CameroonHighway supplement*1.0
ChileAgriculture20.0
Colombia (2)Land colonization, agriculture40.5
Costa RicaPower41.0
Dominican RepublicEducation8.0
EcuadorEducation4.0
FinlandPollution control20.0
GhanaTelecommunications23.0
Greece (2)Education, DFC70.0
GuatemalaTelecommunications26.0
GuyanaEducation**8.0
IndiaDFC100.0
Indonesia (3)Agriculture research, power, irrigation127.5
IsraelIndustrial development35.0
Ivory Coast (2)Tourism, education14.7
JamaicaWater supply & sewerage15.0
Kenya (4)Urbanization***, forestry****,

non-project, oil pipeline
68.0
KoreaRailways100.0
MalaysiaAgriculture research and extension28.5
Mexico (3)Irrigation, rural development, fertilizer310.0
MoroccoAgriculture18.5
Nigeria (3)Oil palm65.5
PakistanPipelines60.0
PanamaFishing port24.0
Philippines (2)Rural development, small industries55.0
SenegalAgriculture*****7.0
Sierra LeoneRural development******5.0
SingaporeEnvironmental control25.0
SpainLivestock33.0
SwazilandRoads7.0
Syria (2)Power, power supplement80.6
TanzaniaIndustry15.0
Turkey (2)Industry amendment, rural development93.0
Yugoslavia (2)Agricultural credit, power120.0
ZambiaTelecommunications32.0
Total loans during fourth quarter of fiscal 19751,898.8
Total loans during fiscal 19754,319.65

With a $1.0 million IDA credit

With a $4.0 million IDA credit

With an $8.0 million IDA credit

With a $10.0 million IDA credit

With a$7.0million IDA credit

With a $5.0 million IDA credit

With a $1.0 million IDA credit

With a $4.0 million IDA credit

With an $8.0 million IDA credit

With a $10.0 million IDA credit

With a$7.0million IDA credit

With a $5.0 million IDA credit

In addition, about $80 million was committed for 9 education projects whose primary objective is to increase skills in rural areas. About $130 million was committed for the construction of rural roads. Thus, in fiscal 1975, the Bank and IDA committed over $1,000 million specifically for the rural poor, or more than twice the fiscal 1974 figure of $473.6 million.

Peter C. Muncie

How wide is the income gap?

The U.N. International Comparison Project (ICP), a cooperative effort of the United Nations Statistical Office, the World Bank, and the International Comparison Unit of the University of Pennsylvania, has established a system of comparisons of real product and purchasing power which so far has been applied to 10 countries. The results of the first phase of the continuing ICP work appear in the newly published book, A System of International Comparisons of Product and Purchasing Power, by I.B. Kravis, Z. Kenessey, A.W. Heston, and R. Summers. The initial set of countries-Colombia, France, the Federal Republic of Germany, Hungary, India, Italy, Japan, Kenya, the United Kingdom, and the United States-included several major developed market economies, several developing countries, and one centrally planned economy, with all of the major regions of the world represented.

The ICP’s detailed calculations of real per capita incomes in these countries indicate that the differences between their levels of affluence though very great are smaller than is commonly believed on the basis of the traditional methods of comparison. The lack of accurate data on comparative levels of output, an important gap in our knowledge of the world economy, led the Ford Foundation, and subsequently the World Bank, to support the ICP’s efforts to diminish that gap. Until now, when such comparisons have been needed, the usual practice has been to convert the outputs of various countries to U.S. dollars (or some other currency) through the use of official exchange rates. But as any traveler knows, the official exchange rates do not reflect the relative purchasing powers of different currencies. The ICP procedure also draws upon national income accounting data for each country, but it has collected prices of several hundred items in each of the countries to estimate the true purchasing power of the currencies. The ICP results at the aggregate level may be seen in Table 1., and they show that the degree of understatement of exchange-rate-derived comparisons is greater for developing countries than developed ones.

The ICP’s attention has been directed to detailed comparisons at disaggregate levels as well as gross domestic product in order to make possible the analyses required for a wide variety of purposes. Accurate comparisons are indispensable in any effort to understand the process of economic growth and development. Because product, income, and expenditure aggregates are fundamental variables in most models of growth or development, a lack of internationally comparable data impairs the validity of cross-sectional comparisons of stages of economic development or judgments on the success of development efforts. This is true whether interest lies in savings or investment ratios, the composition of real output, growth rates, the role of government, or a number of other critical aspects of development. Such comparisons also are useful for policy purposes at international and national levels. For example, an appreciation of the differences in the level of income is important in World Bank decisions regarding lending terms and in the allocation of aid by various donor countries and in the judgment of its efficacy. It is relevant as well to international burden sharing, whether for current costs of international bodies or for developmental or military objectives.

IDA credits during fourth quarter of fiscal 1975(ended June 30, 1975)
Amount
CountryPurpose($ millions)
Afghanistan (2)Agricultural credit, water supply22.0
BangladeshIrrigation27.0
BoliviaAgricultural credit7.5
BurmaTelecommunications21.0
Cameroon (3)Rubber, highways supplement*, education supplement18.2
DahomeyEducation4.0
EgyptTelecommunications30.0
Ethiopia (3)Roads, telecommunications, education71.0
GuineaAgriculture7.0
GuyanaEducation**4.0
HaitiHighways20.0
India (3)Agricultural finance, rural development,

command area development
133.0
Jordan (2)Power, engineering6.0
KenyaUrbanization***, forestry****18.0
MaliHighways supplement8.3
MoroccoAgriculture14.0
PakistanDFC30.0
RwandaEducation8.0
Senegal (2)Engineering, agriculture*****8.0
Sierra LeoneRural development******5.0
Sri LankaDFC4.5
Sudan(3)Education, power, irrigation53.0
Upper Volta (2)Livestock, rural roads16.5
Yemen Arab

Republic (3)
Agriculture, highways, water supply

& sewerage
27.1
Yemen, People’s

Democratic

Republic of
Highways15.5
ZaireTransportation26.0
Total credits during fourth quarter of fiscal 1975604.6
Total credits during fiscal 19751,576.15

With a $1.0 million Bank loan

With an $8.0 million Bank loan

With an$8.0million Bank loan

With a $10,0 million Bank loan

With a $7.0 million Bank loan

With a $5.0 million Bank loan

With a $1.0 million Bank loan

With an $8.0 million Bank loan

With an$8.0million Bank loan

With a $10,0 million Bank loan

With a $7.0 million Bank loan

With a $5.0 million Bank loan

At the national level, it is important for planning purposes that both developed and underdeveloped countries be able to anticipate the patterns of expansion in final demand as income levels rise. Without internationally comparable income, output, and expenditure indicators, it is difficult to use the experience of wealthier countries to anticipate the time pattern of the changes that may be expected to occur in the development of the poorer ones. And, as in Western Europe, Eastern Europe, and Latin America, income and price comparisons may help illuminate potential or actual problems created by regional economic integration.

The work of the ICP builds upon a number of studies done in the past, but breaks new ground in a number of ways: First, in addition to providing “binary” comparisons—each country compared with a singled-out base country—a new methodology has been devised for estimated multilateral comparisons where the base country serves only as a numeraire. Second, for rents and some durable goods, so-called hedonic regression methods have been employed. These methods, made feasible by the advances in economic theory and statistics and the advent of computers, make it possible to hold constant across countries a number of different quality variables and thus improve price comparability. Third, for construction, reliance has been placed almost entirely upon price comparisons for entire construction projects rather than for measured units of building operations (such as the laying of a certain number of bricks). But as important as these innovations are, a far more extensive cooperation of the individual countries than had been enlisted in the past enabled the ICP to make a larger number of price comparisons with more control over the comparability of quality than previously had been possible.

The concluding chapter of the new book examines the empirical estimates at various levels of aggregation to see how well the estimates conform to the implications of economic theory. A preliminary, though necessarily tentative, demand analysis indicates that the numbers are generally consistent with the tenets of the theory of consumer behavior. The finding of greatest interest is the support the data seem to provide for the proposition that tastes are similar the world over, at least at an aggregated level.

With Phase I of the ICP’s work completed, a new set of countries, mainly in the developing sector, is being introduced into the ICP system. In addition to obtaining estimates for these new countries for 1970, all countries’ estimates will be updated to 1973 and 1975.

Kravis, I.B., Z. Kenessey, A.W. Heston, and R. Summers, A System of International Comparisons of Product and Purchasing Power, Baltimore, Maryland, U.S.A., and London, England, The Johns Hopkins University Press, 1975, xi + 294 pp., $7.50 (paperback).

Table 1.Gross Domestic Product per capita as percentage of U.S., 1970
World Bank
Atlas
(exchange-
ICPrate-
Countryestimatesderived)
Kenya5.73.2
India7.12.3
Colombia15.97.1
Hungary40.333.6
Italy45.837.0
United Kingdom60.347.7
Japan61.540.3
Germany (Fed. Rep.)74.761.6
France75.065.1
United States100.0100.0

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