History of the World Bank. What is the impact of the world bank upon development in the south - Essay Example

?History of the World Bank The World Bank (WB) is a renowned international financial Major objective behind its formation was to provideloans to developing countries through capital programs. The World Bank's major objective is to combat poverty for lasting results and provide assistance to people by providing resources, knowledge exchange, creating partnerships, and capacity building in the public and private sectors. The World Bank Group has five agencies (IEG, 2008). Since its inception during World War II with an objective to rebuild Europe, the World Bank generated more criticism and controversy than any other financial institution in the world. Even threatened by its conceivers, beneficiaries, and supporters, the World Bank is closely monitored by agencies which developed around it over a period of time. The institution itself reached at a stage of engulfed by the mounting pressures. However, these pressures have always been there and exerted by either donor governments, national governments, donor agencies, citizen groups, or even World Bank's employees. Their annual meetings are echoed by the slogans of "Ya Basta!" ("Enough is enough!")(Nath, 2001, p.1). Moreover, Meltzer commission report (2000) declared the World Bank as "irrelevant" in the mission of reducing poverty and promoting development (cited in Nath, 2001, p.1). The World Bank as Global Development Agency During the Bretton Woods, USA conference in 1944, 43 countries' meeting led to the establishment of International Bank for Reconstruction and Development (IBRD).IBRD's major objective was to provide loans for rebuilding Europe after WWII. For instance IBRD provided US$28,600,000 for rebuilding and development of the steel industry in France, Belgium, and Luxembourg (World Bank, cited in Nath, 2001, p.2).However, the World Bank's lending portfolio failed to meet the increasing demands within the industrialized countries. Mounting pressure led IBRD to channelize its funds in other developing and poor nations. However, the lack of expertise in dealing with developing countries and a continuous pressure to lend made it disastrous which led to overnight rebirth of IBRD as the World Bank. In its shift from West to East, the World Bank could anticipate the investment opportunities in long-term loans to developing countries for their huge infrastructure projects. It led to the dramatic increase in the Bank's lending for large scale dam project sin Asia, roads projects in Africa, and highway projects in Latin America(Nath,2001,pp.2-3). With above deployments, the World Bank found its niche-electricity supply that is associated with dam projects and represented nearly 50 percent of Bank's annual lending.World Bank patented the approach of "Economic Colonization" for global development. The newly found role as a developmental financial institution, World Bank grew as a powerful and influential institution throughout world. Its investments proved to be very profitable for donors and stakeholders since 1948.There had been times when annual rate of return exceeded the annual amount of loan provided. In that period, even when Bank focused on investing in socials sector, the traditional sector investments increased (World Bank 1992, BIC, 1990 cited in Nath, 2001, p.3). The trend of such investment and returns continued until international debt crisis emerged in early 1980s.The risk of World Bank loan's default increased. The Bank changed its focus after a series of closed door meetings of World Bank's shareholders (United States, Japan, Germany, France, and UK). Rather than a traditional project lending approach, World Bank focused on bringing developing economies in its control in order to ensure the return. Until the ends of early 80s, approximately 25 percent of the Bank's funds were used for economic restructuring of developing countries through its Structural Adjustment Programs (SAPs).SAP was remote controlling the budget and expenses of the recipient countries. World Bank and IMF, often called Bretton Woods twins, were in a position to dictate macroeconomic policies and seize sovereign control of economic sector of southern governments in case the loan payment default. One quarter of the total the World Bank's loan continued to be in the form of SAPs until 1996(Corpwatch cited in Nath, 2001, p.3). The question arises whether there is some positive impact of World Bank or it is serving as a tool to control world. Environmental concern World Bank's policy for environment has undergone major philosophical change. From the do -no-harm approach that stressed on lowering the harmful impact of World Bank's projects, it shifted to work on the environmental improvement that are considered to be associated with poverty and development(World Bank cited in Nath,2001,p.7).Environmental review has become crucial for lending and mandatory for some particular kinds of lending. Environmental Assessments (EAs) is mandatory for all World Bank's projects at not only project level but also on sector, and regional level. In doing so, the projects are improved and downsized in order to comply with the environmental regulations. The Bank also provides environmental assistance to recipient countries in order to ensure their compliance. It provided $15 billion with primary environmental objectives in 1990s. Environmental lending amounts to 10 percent of total lending with Banks shift to greater number of smaller projects (Nath, 2001, p.7). Moving towards a Learning Bank Recently, the Bank has moved from financial Bank to knowledge Bank. This change in its philosophy has ideologically moved it ahead since knowledge is nurtured in human mind and lead to growth and development. No doubt, knowledge enriches and opens human mind to use new ways and discard the old ones. A shift to knowledge Bank must inspire World Bank for objective self assessment and to learn from past mistakes and become more clear and flexible for policies and dynamics. Continuous improvements are the signs of learning that is clearly visible (Nath, 2001, p.9). Positive Impact of World Bank Environmental Concerns In Rio Earth Summit in 1992, the World Bank effectively positioned itself as a suitable institution for ensuring the effective solution to the global environmental issues. Many of the steps Bank took were perfunctory, however, the effort certainly paid off since it cascaded an effect on other institutions and agencies and leveraged the goals of UNCED. Environment became the top priority for other aid agencies and continued to be the topic of concern for world leaders. For instance, World Bank's Global Environment Facility (GEF) that was intended to work as a financial mechanism and contribute to South's initiative for combating greenhouse emission and loss of biodiversity. Nevertheless, even with lots of aspects working against developing countries, GEF created markets for never existing financing models of development. It raised the level of intellectual discussions and spread awareness about financial models within developing countries (Nath, 2001, p.11). Education Concerns In the field of education, the World Bank is still the single largest donor for educational programs in poorest countries of the world. During 1990s, the Bank significantly increased the loans for educational purposes and dispensed US$1.9 billion (1991-1999 period) that amounts to nearly 8.2% of its overall lending which is nearly double the amount(4.8% that Bank allocated to education in 1980s. Bank must be acknowledged for its efforts in the areas where other financial institutions participate either halfheartedly or ignore completely (Nath, 2001, p.11). World Bank's HIPC Initiative In 1996, the Bank came up with the idea of decreasing the external debt of 22 heavily indebted countries with HIPC initiative. These are mostly African countries under heavy debt. The World Bank and IMF decreased their debt by $11billion (WB) and $4 billion (IMF) in 1999. This debt reduction certainly helped countries in decreasing their early repayment by two-third such as, Mozambique. The World Bank and IMF gathered applauds form its severest critic at this initiative. Another enhanced HIPC initiative in 2000 provided debt reduction to Benin , Senegal, Cameroon, Burkina Faso, Niger, and Sao Tome. The World Bank's "seal of approval" for initiating and catalyzing a financial investment has potential to be used very effectively. WB has the authority to work with private sector without ignoring the environmental aspects. World Bank's funds can be provided on the strict conditions of environment procedure compliance. This "seal of approval" can assist World Bank in leveraging more funds in such projects (Nath, 2001, p.12). World Bank's Rural electrification Rural electrification ensures enhanced quality of life, increased study times, improved environment for education, extended business hours for small businesses, and enhanced security (IEG, 2008, p.3). During last 25 years, Bank's energy strategy has evolved considerably. World Bank's policy papers in 1993 laid great emphasis on the role of private sector and high-lighted environmental concerns (World Bank 1993a, 1993b). Another paper highlighted the presence of 2 billion poor people without sufficient access to modern energy and Bank's ability to meet their needs (World Bank 1996). A sector board paper stressed on poverty and environment both (World Bank 2001b).It gradually established the link between energy provision and poverty eradication. Initially, the World Bank lend for infrastructure development, therefore some of its lending was given to the power sector such as, Loan 005 for Chile's power and irrigation project in 1948. Bank was involved in extensive electrification projects throughout the world during 1950s and 1960s for instance, Volta Power Project in Ghana during 1962, Philippine Binga Hydroelectric Project in 1957, and Diesel Power and Thermal Power Projects in Nicaragua during 1950s. During 1970s, the attention shifted to rural electrification and investments rose to $10 billion in the first years with additional amount of $10-15 billion during 1970s (IEG, 2008, p.3). By 1975, most of the Latin American countries had developed their countrywide networks that linked major areas and moved to connect rural centers and Asian countries were in the process to connect their major demand centers while African countries were at the stage of generating their electricity-generation facilities. Therefore, Bank's rural electrification focused on Asia for instance, Malaysia Rural Electrification Project (982-1988) and Bangladesh projects (Bangladesh RE I, 1981–1990, and RE II, 1985–1993) (IEG, 2008, p.3). By 1980s, the Bank lend to public sector monopolies for power generation and supply, however, in 1980s, the attention shifted to institutional problems in order to enhance economic efficiency and sustainability in energy sector by improving lease-cost planning, marginal-cost pricing and other procedures(IEG,2008,p.9). World Bank's power sector support strategy paper and the power sector Operation Directives of 1987 reflect certain changes in power sector. Bank worked on more sophisticated environmental, resettlement standards, and implementation procedures (IEG, 2008, p.9) The Bank’s Evolving Energy Strategy During 1990s, Bank shifted from public sector lending to the private sector participation in power generation and supply as mentioned in the “The World Bank's Role in the Electric Power Sector” (World Bank 1993b).IEG report Power for Development (2003) analyzed private sector experience in power generation and supply and concluded that proposed benefits can be achieved with appropriate government support. However, due to the fact that reforms were in initial stage in many countries, distribution sector reforms were lacking as compared to the reforms in generation sector. The report highlighted some major poverty and environmental related issues. World Bank paid huge attention to the fact that poor people are often deprived of the direct benefits of the rural electrification programs (IEG, 1994). World Bank's publication, Rural "Energy and Development: Improving Energy Supplies for Two Billion People"(1996) established the links between energy and poverty. The study highlighted the economic and health cost of biomass energy sources and proposed initiatives to market liberalization for energy supplies that ensures that the poor people will benefit from RE. World Bank's sector board paper (World Bank 2001b) pushed poverty eradication as a central priority of Bank's energy supply mission. Other measures associated with this priority are gender related access issues (p.23). Mali Located in the middle of West-Africa, Mali is among the largest Sub-Saharan African countries. Mali's 65% or more surfaces is desert and characterized by high temperature and high wind velocity. Moreover, the country is landlocked and surrounded by the countries such as, Algeria, Mauritania, Burkina, Faso, Guinea, Senegal, and Cote d’Ivoire. With 14.1 million populations, nearly 64% lives in rural areas (World Bank Report, 2011/CIA, 2011/MDG, 2007 cited in Dekker, 2011, p.33).One of the poorest countries of Africa, Mali's 80 percent population has no access to electricity.RE projects had very positive impacts on the lives of millions of rural people in Mali (Dekker, 2011, p.33).Furthermore, Bank organized programs for awareness and better management of electricity through Demand Side Management or DMS. The Mali Household Energy and Universal Access Project promote the low-energy consumption lamps and energy efficient tools and products. It helps reduce consumption during peak hours and generate low bills. Similarly, Vietnam System Efficiency, Equalization, and Renewable Project worked for peak reduction of 120 megawatts through Demand Side Management (DMS) measures including energy efficient lamps and time-use meters for different customers (IEG, 2008, p.27). World Economic Freedom Boockmann and Axel (2002, p.1) analyzed IMF and World Bank polices and impact on the composite index of economic freedom by Gwartney et al. (2000) and its sub-indexes and incorporated a 85 countries during the observation period of 1970-1997.With respect to the World Bank, they concluded that number of WB's projects have overall positive impact on economic freedom, on the other hand, impact of the amount of WB's credits is negative. The World Bank's projects are not only important due to its financial worth but also due to the knowledge they transfer. Several programs in operation enhance economic freedom because of either their direct impact on policies or transfer of knowledge and assistance that increases with time spent with the institution (Boockmann and Axel, 2002, p.5).Boockmann and Axel (2002, p.8) regression results suggest positive impact of World Bank on economic freedom while the role of IMF is less obvious. They concluded that projects are productive in terms of economic policies; however, they become counterproductive as their volume expands. Currency Devaluation Boockmann and Axel(2008, p.18) identified that World Bank's programs have considerable positive influence on the difference between the official and black market exchange rate. WB does not compel countries to devalue their currencies, but some SAP programs focus on liberalizing the exchange rate (Dreher, 2002).As a result, some overvalued currencies automatically devalued that influences the black market premium(Boockmann and Axel,2002,p.18).Furthermore, Boockmann and Axel(2002,pp.18-20) states that: "Also significant is the Bankis influence on the use of conscripts in national defense systems (which, however, is rather surprising), on interest controls as well as freedom of citizen to engage in capital transactions with foreigners. While conditions on interest rate policy are included in some adjustment programs restrictions on the freedom of citizens to engage in capital transactions with foreigners are usually not covered by Bank conditionality, as opposed to IMF programs ". Heckelman and Stroup (2000, p.530) also found that Gwartney sub-indexes have a positive correlation with the growth. Boockmann and Axel (2002) results of World Bank's positive impact on growth is consistent with Harrigan and Mosley (1991, p. 83) as they also identified positive impact of compliance with WB's conditions which is offset by the negative impact of financial flows. Poverty Reduction The World Bank and IMF introduced Poverty Reduction Strategy Papers (PRSPs) in an effort to secure HIPC debt relief and other funds (Stewart and Michael, 2003, p.1).The basic objective is to highlight the importance of spending on poor. The strategies mentioned in PRSPs are focused on increasing the access of poor people to education, health, clean water in terms of exposure and quality. For instance, PRSP in Vietnam ensures that it implements the 20/20 initiative .It implies that 20 percent of aid and 20 percent of government budget has to be used to for social services (Vietnam, 2002), Nicaragua’s PRSP has a goal of additional investment in water and sanitation (Nicaragua, 2001), Bolivia's PRSP's used its spending for poorest municipalities (Bolivia, 2001) (cited in Stewart and Michael, 2003, p.1). Agriculture Sector PRSPs stressed the agricultural sector policies, for instance, food security policies, environmental protection, enhanced productivity, gender equality and protection of ethnic minorities and those who are vulnerable (children and disabled) .All of these changes are associated with the poverty reduction agenda of the World Bank. A genuine PRSP contribution is marked by the lobby formation that forced national government to implement affirmative action policies (Stewart and Michael, 2003, p.17). ODI (2002) reports that Kenyan Pastoralist Groups lobbied very successfully for their concerns about reach to productive assets, management of natural resources, and extension facilities for livestock to be incorporated in the PRSP's final document. The lobbying successfully won them higher-than-average funds for education bursaries in pastoralist areas. Women's groups successfully gender concerns over PRSP and directed budget allocation (McGee, 2002, pp.42-43). Similarly, action aid offices were reported that HIV/AIDS groups and peasant producers shaped sectoral policies in Malawai and Rwanda and Vietnam. (Zaman, 2002, pp.4-17). In many countries, CSOs lobbied for removing the user fees (Klugman cited in Stewart and Michael, 2003, p.17). Bolivian Crisis In early 1980s, Bolivia was struck by a severe economic crisis. The crisis appeared as consequences of over-borrowing, lacking performance at mining and gas exports, macroeconomic mismanagement, drought, and political instability. During crisis, GDP decreased by an annual rate of 2.6 percent and exports by 5.5 percent annually (Anderson, Constantino and Kishor, 1995 cited in Kaimowitz,Graham,and Pablo, 1999, p.507).According to Laserna (1994) inflation was 10 percent in mid-1970s increased to 275 percent in 1983, and reached more than 11,000 percent in 1985(cited in Pacheco, 1999, p.507).The World Bank Report (1996) explains that SAP generated mixed macroeconomic outcomes, and states that: " They succeeded in reducing the hyper-inflation to under 15% in 1987 and most of the period since.GNP declined in 1986, when international tin and hydrocarbon prices fell, then grew 2.5 % per year during 1987-1989, and over 4% on average in the first half of the 1990s.Goods and services exports rose from $721 million in 1985 to $1,183 million in 1994".(cited in Kaimowitz,Graham,and Pablo,1999,p.507) In late 1985, after soybean price control removal, devaluation, exporter incentives (social and low taxes, and better infrastructure promoted soybean production and compensated the credit loss and foreign exchange subsidies which are associated with the SAP. Promoting soybean exports was central to the World Bank's strategy for the improvement of foreign exchange (Morawetz, 1986 cited Kaimowitz,Graham,and Pablo, 1999, p.516), without WB's policies, it was impossible to soybean boom. Due to the devaluation and elimination of the price controls, Bolivian farmers got 62 percent of international price of the soybean in 1986 as compared to 38 percent in 1984(CAO,1996 cited in Kaimowitz,Graham,and Pablo,1999,p.512). Bolivian government expanded the road infrastructure in Santa Cruz in order to promote soybean production. Since 1989, the World Bank's "EasternLowlands" project allocated significant amount of funds to develop and improve the existing roads (Davies, 1993 cited in Kaimowitz,Graham,and Pablo, 1999, p. 513).Moreover, Bolivian woods and timber exports also increased to 25 percent as a result of devaluation and price control. In 1080s, the World Bank and the Overseas Development Administration started to support agroforestry and social conservation research activities (Baudoin et al., 1995 cited in Kaimowitz,Graham,and Pablo, 1999, p.516). After devaluation removal of price control in 1985, Bolivian soybean production increased which turned Bolivia from an importer to exporter of soybean products (Kaimowitz,Graham,and Pablo, 1999, p.513). Conclusion Conclusion This research study raises the questions that if economic growth of the country be ascertained through external borrowing? Or it becomes a curse for future generation? The study also focused on Structural Adjustment Programs (SAPs) of the World Bank and the impact of its policies on the south. It follows well-defined framework to evaluate each dimension of external debt, its effects on economic growth, and effect of SAPs on the economic condition and development of the developing countries. Also a critical analysis of the negative aspect of SAP of World Bank would be done in this study. International debts are debts owned by the countries to the non-residents. According to the neo-classical economic theory, the financially weak countries must borrow in order to meet the needs of its investments and needs. However, high level debts also negatively affect the economic growth of any country that can be associated with the debt-overhang theory. According to debt-overhang theory, the expected return of external debt is inadequate compared to the contractual value of debt. The heavy burden of debt on the developing countries drains their investments too and returns get taxed away. Apart from this high debt also negatively affect the investment rates and growth of the country because of huge cash flow and has effects of moral hazards. However, on the opposite side, if external debt is considered at the level of foreign borrowings, then it could have a positive impact on growth and investment of the country. External debt has a negative effect on the economic growth and development. Studies on 61 countries concluded that external debt creates negative effects on the physical capital and productivity growth of the country. The North-South divide identifies the income inequalities in the countries that has led to poverty, however, in the recent time, these terms are replaced by UN paradigm and the Bretton Woods paradigms. Both the Bretton Woods paradigm and UN paradigm has suggested that globalization has disturbed the idea of north-south divide. Bretton Woods supports globalisation and UN paradigm considers globalisation as a multiplier for inequalities. So Bretton Woods support market liberalization, while UN paradigm focuses sustainability and social equity Structural Adjustment Programs were the policies implemented by the World Bank along with IMF in developing countries. These policies were formulated for the developing countries which opted for new loans from the World Bank or IMF, or for obtaining rebates in interest rates on their existing loans. In the year 1999, Work Bank transformed the SAPs into Poverty reduction Strategy papers (PRSP). The policies introduced by the World Bank did more harm to the poor countries than good. The Bank has always presented itself as a saviour, but the reality has been different. It has compelled these countries to become so much depended on their loans that the authority and control of these countries has gone to the developed countries and the bank. They rushed to socialism in the third world countries resulting in the collapse of the economy as in case of Africa It is running like a profit making factory, whose aim is to meet the quantitative production goals. The mission of the World Bank is to lend money to the developing nations, so that they can develop faster, but due to corruption within the system, the mission could never be accomplished. Many developing or under developed countries shrink their exports to a limited range of products because of deficiency in cash and Northern Protectionism. Many Developing Countries are in debt and poverty due to the policies of the World Bank and the IMF. The programs designed by the World Bank and IMF has been criticized for many years for they resulted in poverty in these third world countries, because of the increasing level of dependency on the developed countries. The opponents of SAPs can easily ensure that polices formulated under SAPs favoured the large land owners over the small land owners. It was also observed that the credit facilities were available for the capital-intensive industries.In 1990, World Bank developed their World Development Report, in which poverty was the major area of concern and the bank developed several provisions for providing basic social services to the needy for increasing the labour productivity.SAP failed in countries which are rich in land resources. The standard requirements for economic and political success were absent in most of the debtor countries. SAP induced some negative effects which include malfunction, corruption, questionable alliances, failure of democratic governments, and other circumstantial issues. SAP also induced: high interest rates on heavy burden of loan, profits that is generated from the manufacturing and production within the country gets allocated to other international countries, so it does not get the opportunity to be recycled within the country, the money that remain within the country is transferred somehow by paying the loan principles or interests, the high rate of interest and the requirement of the domestic government to balance their national budget are also making the situation worse, the attempts that were made after the debt crisis of 1980, to recover from the situation, led to further indebtedness, and the constant cycle of repaying heavy interest under the SAP framework of the World Bank will never allow the countries to recover or catch a breath. According to David Held, the raw materials and other commodities were exported at higher prices that the domestic markets could offer when the measures for protection have been abolished. According to the United Nations; Human Development Report of 1996, the growth that had occurred were mainly capital intensive, but did not generate any job opportunities for the people. The growth improved the position of the wealthy people in the countries, but it did not change the situation of the poor in any way. The democratic condition has become worse due to the growing discrepancies and the government could not take any actions due to the restrictions stated by SAPs. The negative effects of corrupt practices on misallocation of useful resource or growth were very much visible and its effect on the business environment was significant, but measuring such damage was a difficult task.The World Bank and IMF attracted the investors to focus more on the capital fertility of the countries. This creates a conflict between the interest of the countries and the investors.The sovereignty of the countries was disturbed because of the adjustments that were imposed by the World Bank and IMF. The government of the countries could not take decisions that were demanded by the citizens of that country. Major events like the cold war, global recession, civil wars, etc affected the economic condition of different countries. The global petroleum crisis in the year 1970 resulted in the increasing interest rates and debt crisis. This forced the countries to seek help from the World Bank and IMF. Furthermore, the external debt of many countries increased and managing the economy became more complex. The commodity prices decreased and this led to debt crisis.Since its inception during World War II with an objective to rebuild Europe, the World Bank generated more criticism and controversy than any other financial institution in the world. Moreover, Meltzer commission report (2000) declared the World Bank as "irrelevant" in the mission of reducing poverty and promoting development (cited in Nath, 2001, p.1). During the Bretton Woods, USA conference in 1944, 43 countries' meeting led to the establishment of International Bank for Reconstruction and Development (IBRD). In order to understand the positive role of World Bank, if any, we have to analyze whether World Bank is reforming itself or not. Moreover, it is critical to analyze the factors that led to its creation. We need to understand that how a financial institution that initiated the trend of financial assistance for development failed to continue doing that (Nath, 2001, p.5). The World Bank has always been under pressure to lend. The constant pressure to remain the largest development financial institution has led it to the wrong direction. Such pressure is the most damaging for World Bank's profile not only outside but also inside of the organization. Bank's entire hierarchical structure is devised to enhance the lending part. Bank's staff performance is only accessed by the amounts of funds they disbursed over anything else (Nath, 2001, pp.5-6). The Bank acknowledges the fact that there is a trade-off between the quality and quantity of its lending programs (Wapenhans Report, 1991 cited in Nath, 2001, p.6). The pressures to lend compel the Bank to lower the requirements for lending and accelerate the assessment procedure. McNamara started accelerating lending during 1060s and early 1970s as Bank lowered the requirements. During his tenure, Tanzania received more aid per capita than any other country. However, the Bank's unconditional support for a dictator (Nyerere) proved to be the major cause of problems there (Nath, 2001, p.6). During 1990s, the Bank significantly increased the loans for educational purposes and dispensed US$1.9 billion (1991-1999 period) that amounts to nearly 8.2% of its overall lending which is nearly double the amount(4.8% that Bank allocated to education in 1980s In 1996, the Bank came up with the idea of decreasing the external debt of 22 heavily indebted countries with HIPC initiative.Rural electrification ensures enhanced quality of life, increased study times, improved environment for education, extended business hours for small businesses, and enhanced security (IEG, 2008, p.3). During last 25 years, Bank's energy strategy has evolved considerably Boockmann and Axel (2002, p.8) regression results suggest positive impact of World Bank on economic freedom while the role of IMF is less obvious. They concluded that projects are productive in terms of economic policies; however, they become counterproductive as their volume expands. The World Bank and IMF introduced Poverty Reduction Strategy Papers (PRSPs) in an effort to secure HIPC debt relief and other funds (Stewart and Michael, 2003, p.1).The basic objective is to highlight the importance of spending on poor. The strategies mentioned in PRSPs are focused on increasing the access of poor people to education, health, clean water in terms of exposure and quality.In late 1985, after soybean price control removal, devaluation, exporter incentives (social and low taxes, and better infrastructure promoted soybean production and compensated the credit loss and foreign exchange subsidies which are associated with the SAP. World Bank's policy for environment has undergone major philosophical change. From the do -no-harm approach that stressed on lowering the harmful impact of World Bank's projects, it shifted to work on the environmental improvement that are considered to be associated with poverty and development(World Bank cited in Nath,2001,p.7 Supporters of SAP attribute them as a "precondition" for economic development and reject the much feared negative environmental impacts (Monasinghe and Cruz, 1994). It is argued that SAP provided economic stability that is essential for sustainable natural resource management (Killick, 1991 cited in Nath, 2001, p.9).On a positive note, the Bank has started to accept its past mistakes and made some changes. Most important change is its forest strategy formed in 1991 and reviewed in 2000).The changed stemmed from the recognition that forest lending goals are not achieved (Nath, 2001, p.9). The OED reviewed forest sector policy in 1998 and highlighted the deforestation consequences of World Bank's projects, natural resource depletion in countries trying to repay the debt, export emphasis that is promoting the cutting of ancient trees and virgin forests. Furthermore, OED report hypothesized that the Bank has not implemented many parts of the multi-sectoral approach devised in 1991 policy (FPIR cited in Nath, 2001, p.9). Nevertheless, the change process within the Bank is very slow due to its unwillingness to pay attention to opposition (Nath, 2001, p.9). The World Bank is continuously evolving and learning from its past mistakes. It is clear that the institution is more aligned with humanistic and developmental concerns, however, small number of reforms cannot abolish the impact of intervention policies of past. The Bank can face threat to its existence again if it does not continue to evolve. World Bank must avoid projects that serve their own interests such as, gargantuan infrastructure projects. The Bank must concentrate on the transparency of information and objective decision making by considering all the key stakeholders' interest. The World Bank must involve local and national governments in the decision making in order to save social fabric and ensure equality. References Dreher, A. (2002), The Development and Implementation of IMF and World Bank Conditionality, HWWA Discussion Paper 165. Heckelman, J. C.,Stroup,M.D. .2000. Which Economic Freedoms Contribute to Growth?, Kyklos, Vol. 53, 527-544. Harrigan, J., P. Mosley (1991), Evaluating the Impact of World Bank Structural Adjustment Lending: 1980-87, The Journal of Development Studies, Vol. 27(3), 63-94. ODI ,2002.Assessing Participation in PRSPs in sub-Saharan Africa' PRSP Synthesis note 3. February 2002.[pdf].Available at:< http://www.odi.org.uk/resources/docs/5486.pdf > [Accessed 20 August 2012] McGee R., 2002. 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