World Bank and you
This week’s headline business story has to be the decision by the World Bank‘s Board of Directors to approve what is described as a record investment of $700 million in guarantees, ostensibly to support a major gas infrastructure dubbed “Sankofa Gas Project”.
Advertisement
The project, which is said to be located 60 kilometres offshore is expected to, at least, provide support to the generation of about 1,000 megawatts of energy, increasing the country’s power pool significantly, and the added advantage that it would also be a cleaner power source that would replace “polluting and expensive oil-burning electricity” makes it all even more impressive.
There is no gain, however, these days, talking about the devastating effect of the energy crisis the country is currently facing because it has dragged on for such a considerable length of time that everyone has a story or two to tell about the situation We have our own scripts to write about it!
For this reason, there has been a lot of interest in the most recent announcement about this possible initiative that could help address the energy crisis, this time spearheaded by World Bank guarantees that are likely to help reduce the perceived risk associated with the project and possibly mobilise private investment inflows too.
Indeed, the calculation now is that the guarantees could help mobilise $7.9 billion in new private investment for offshore natural gas investment in the country, and that would represent the biggest foreign direct investment in the country’s history.
So what role does the World Bank play in national economies and for that matter what does this new venture mean to the country?
Well, the above question was one of the many l received concerning this deal when the announcement was made.
In fact, in my regular resident analyst role last Monday on a leading national television station, discussions centred around “why” the World Bank was doing this, and “how” it helped the country, prompting me to think about an article that could provide “further” and perhaps “better” explanation on the World Bank and the arm of love that the institutions sometimes extended to countries in need.
So here are some basic facts: After the Second World War, the world’s economy, expectedly, was not in good shape. The admission by economists on both sides of the Atlantic that something had to be done to rebuild the global economy, especially with the devastated situation in Europe, led to the organisation of the United Nations Monetary and Financial Conference in July 1944.
Other Trending Stories
History has it that representatives from 44 nations attended the conference and they were led by John Maynard Keynes from the UK and Harry White from the USA, both economists.
Meanwhile, the International Bank for Reconstruction and Development, known as the World Bank, was set up in 1944 aimed at helping the undeveloped and developing countries.
The situation as described above did not require any kind of pussy-footing as the reconstruction of Europe was vital to any kind of economic rebound that was so desperately needed.
The concerted approach by those in the know was that soft loans, guarantees and pure grants were needed to kick-start a global economy that had experienced depression in 1939 and a bitter war right after that.
The Marshall Plan, what the US proposed at the time to serve as Europe’s guide to recovery, played a big part in all of this. In effect, the World Bank has always had a hand in helping countries to develop or to surmount challenging situations.
With this in mind, let us now look at what the bank proposed to be guarantees to the country in this latest financial package. Shall we? Great.
First off, you may have heard so much talk about an International Development Association (IDA) component of the loan…Well, according to the Bank, its the IDA, established in 1960, “helps the world’s poorest countries by providing grants and low to zero-interest loans for projects and programmes that boost economic growth, reduce poverty, and improve poor people’s lives”.
Further, the Bank says “IDA is one of the largest sources of assistance for the world’s 77 poorest countries, 39 of which are in Africa.
Resources from the IDA bring positive change for 2.8 billion people, the majority of whom live on less than $2 a day.
Since 1960, the IDA has supported development work in 112 countries. Annual commitments have averaged about $18 billion over the last three years, with about 50 per cent going to Africa”. That is where Ghana is getting the support from.
The second component of the facility is what is termed International Bank for Reconstruction and Development (IBRD), and as stated earlier, was created in 1944 to help Europe rebuild after World War II.
“Today, the IBRD provides loans and other assistance primarily to middle income countries. IBRD is providing innovative financial solutions, including financial products (loans, guarantees, and risk management products) and knowledge and advisory services (including on a reimbursable basis) to governments at both the national and sub-national levels”, part of the release on the guarantees stated.
Whereas the work of the World Bank has been criticised by some over the years, there is no denying also that the institution has played a pivotal role in the fight against poverty and underdevelopment since its inception.
Advertisement
Gradually, the Bank is becoming the people’s bank as the geo-political situation of the world today has led it to be more engaging – building partnership - than the teacher-student relationship that it promoted in the past.
We must listen to them again….
(botabil@gmail.com)