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Day 44 – Q.3 How do multilateral organisations like World Bank and ADB finance developmental initiatives in developing countries? Explain.

  • IASbaba
  • January 10, 2023
  • 0
GS 3, Indian Economy, TLP-UPSC Mains Answer Writing
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How do multilateral organisations like World Bank and ADB finance developmental initiatives in developing countries? Explain.

विश्व बैंक और एडीबी जैसे बहुपक्षीय संगठन विकासशील देशों में विकासात्मक पहलों को कैसे वित्तपोषित करते हैं? समझाएं।


Approach –

In this question candidate need to write about how multilateral organizations like world bank and ADB  finance developmental initiatives  in developing countries .

Introduction – 

ADB and the World Bank operate within a broad, evolving, and increasingly complicated global aid architecture. Both organizations finance developmental initiatives in many developing countries.

Body-

The World Bank is a global organization dedicated to providing funding, advice, and analysis to developing nations to help their economic advancement.

  • ADB was established in 1966 “to foster economic growth and co-operation in the region of Asia and the Far East … and to contribute to the acceleration of the process of economic development of the developing member countries in the region, collectively and individually.
  • Its initial focus was on food and rural development projects but it quickly diversified its operations to include education, health, and infrastructure development.
  • It was during this period that ADB made poverty reduction its key objective. Starting with 31 members in 1966, ADB now has 67 members, of which 48 are from Asia and the Pacific and 19 are from outside this region (ADB Annual Reports various issues).
  • The World Bank was created in 1944 to extend finance for the reconstruction of Europe following the Second World War and subsequently to overcome obstacles facing developing countries trying to access international capital for development purposes.
  • IBRD and IDA constitute the core of the World Bank Group and provide financial and technical assistance for development in low- and middle-income countries through a suite of loans and grants across the entire range of development
  • challenges facing poor countries including health, education, infrastructure, agriculture, public administration, macroeconomic management, institutional development, governance, financial and private-sector development, environmental protection, and natural resource management (World Bank Annual Reports various issues).
  • Both the World Bank and ADB are actively involved in every low- and middle-income country in Asia and the Pacific, except North Korea and Myanmar—although in Myanmar, the two institutions have begun to assess the economic situation and provide broad policy advice.
  • There is a similar overlap in sect oral involvement.To make loans and equity investments for the economic and social development of its developing member countries.
  • To provide for technical assistance for the preparation and implementation of development projects and advisory services.

How world bank disburse loans –

  • The Bank borrows the money it lends. It has good credit because it has large, well-managed financial reserves. This means it can borrow money at low interest rates from capital markets all over the world to then lend money to developing countries on very favorable terms
  • Bank loans work similarly to personal loans you get from online lenders: After you apply, the bank will review your credit score, history and income to determine how much money to loan you and what annual percentage rate you qualify for. Once you get the loan, you’ll pay it back in monthly installments.
  • The ADB and the World Bank both make the quickest disbursements, whether crisis-specific or not, primarily in the form of budget support. Relative disbursement rate, which tracks the relative rate at which a given commitment disburses, was highest for program and policy-based lending (PBL) instruments at ADB, and for Development Policy Loans (DPLs) at the World Bank.
  • To respond to the request for assistance in coordinating developmental policies and plans in developing member countries.
  • Notwithstanding their similar objectives and overlapping responsibilities, coordination between the World Bank and ADB in Asia is not a simple matter.
  • A World Bank project currently under preparation will help the social registry evolve to reflect the changing circumstances of the poor, including a localized automated system for people to easily and frequently update their data and allow that data to flow into support programs. Mobile technology and big data analytics will assess needs and determine eligibility. The outcome will be a more dynamic registry that remains up to date and ready to respond to crises.

World banks recent projects in India –

  • The development objective of Maharashtra Project on Climate Resilient Agriculture Project for India is to enhance climate‐resilience and profitability of smallholder farming systems in selected districts of Maharashtra. This project has four components.
  • The first component, Promoting Climate‐resilient Agricultural Systems, aims to strengthen the adaptive capacity of smallholder farmers to adjust and modify their production systems to moderate potential future impacts from climate events.
  • ADB is also setting up a policy research unit that will use evidence-based information to continue fine-tuning and improving social protection systems.
  • A $500 million loan will help improve mobility in Bengaluru city through a metro rail project, and a $350 million loan will accelerate policy action to expand access to water, sanitation, and affordable housing.
  • ADB also extended a $251 million loan to strengthen flood-risk management in Chennai’s urban areas. Other urban projects will support affordable housing in Tamil Nadu and improve urban services in Jharkhand, Tripura, and Uttarakhand.

Conclusion-

As developing countries face tough economic times, the World Bank and ADB  has supported uncountable initiatives to expand opportunity and provide much-needed services to the poor, such as improving education and health services, promoting the private sector, constructing infrastructure, and strengthening governance and institutions.

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