The Multilateral Development Banks: Improving U.S. Leadership

The Multilateral Development Banks: Improving U.S. Leadership

The Multilateral Development Banks: Improving U.S. Leadership

The Multilateral Development Banks: Improving U.S. Leadership

Synopsis

Upton examines the U.S. policy process toward the five multilateral development banks-the World Bank Group, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, and the European Bank for Reconstruction and Development-as a case study in how the United States manages its participation in multilateral institutions. The management of the U.S. role in these institutions is significant primarily because these institutions play an increasingly important role in the U.S. relationship with the developing world and because, for the most part, they are mature institutions being called upon to adapt their roles and operating styles to new financial and political realities.

Excerpt

The establishment of the World Bank after World War II was a significant act of economic statesmanship. Whatever one's opinion about its proper role in the future, there can be little legitimate dissent to the fact that the Bank contributed significantly to world development in the decades after its birth.

The Bank's role has changed over the years. The creation of the World Bank--more precisely, the International Bank for Reconstruction and Development (IBRD)--came at a time when global financing, particularly for the reconstruction of Europe (the "R" in the IBRD title), was largely nonexistent. The IBRD provided a mechanism to attract this financing by drawing on an implicit guarantee of repayment from the Bank's collective members. The IBRD borrows on world money markets, using the assurance of what is known as the "callable capital" of the member countries, and then on-lends for projects and programs in the individual countries. In addition to making capital available, the Bank provided expertise to shape and evaluate projects. It still does. The callable capital literally can be called in the event of borrowing country defaults, but this action has never been necessary.

As reconstruction in the developed countries was completed, the IBRD shifted its emphasis to developing countries. The developed countries by then could raise needed capital on their own, but the IBRD served as an intermediary between the money markets and the developing country borrowers because it could obtain funds at the interest rate of a premier borrower, whereas most developing countries could not. Because the source of the money . . .

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