The World Bank Group extended loans, credits, grants, equity investments, and guarantees totalling nearly $6.9 billion to South Asia in fiscal 2007. The World Bank said here on Thursday that this was an increase of $2.3 billion over the previous year, demonstrating the institution's continuing role in fighting poverty.
South Asian countries look for ways to tackle their social challenges even while most of their economies grew aggressively. The eight countries of South Asia are using World Bank Group support in more than 78 projects designed to overcome poverty and enhance growth; for example, by improving education and health services, promoting private sector development, building infrastructure, and strengthening governance and institutions.
Contributing to this increase was: $1.6 billion from the International Bank for Reconstruction and Development (IBRD), which provides financing, risk management products, and other financial services; $4.03 billion from the International Development Association (IDA), which provides interest-free loans and grants; $1.18 billion from the International Finance Corporation (IFC), which makes equity investments, and provides loans, guarantees and advisory services to private sector business in developing countries; and $76 million from the Multilateral Investment Guarantee Investment Agency (Miga), the Group's political risk insurance agency.
Globally, the World Bank Group committed $34.3 billion in fiscal 2007, up $2.7 billion (7.8 percent) from fiscal 2006. India was by far the largest borrower from IBRD and IDA, accounting for $3.75 billion, or 15 percent of total lending from these two institutions. The World Bank's programme in India focuses on providing basic services such as access to clean water and education, improving infrastructure for rural areas, and employment. The increase also reflects $700 million in lending to the health sector to India, which was carried over from the previous year. Pakistan was the World Bank's seventh largest borrower with $985 million in loans and credits.
Nearly, 60 percent of the World Bank Group's commitments to South Asia came from the IDA and more than two-thirds of the lending financed projects in the areas of rural development and human development such as health, education, nutrition and HIV/AIDS.
Many of the Bank's projects in the last fiscal year supported existing programmes that are delivering results. For instance, in Afghanistan the Bank approved a $120 million IDA grant for the Second National Solidarity Programme, a community-led reconstruction and rural infrastructure initiative that has reached about 14 million rural people - 74 percent of Afghanistan's rural population - since its inception in 2002.
Looking ahead, the Bank would focus on cross-cutting reforms such as governance and fiscal management, and continue addressing deficiencies in the region's investment climate, such as weak infrastructure, red tape, and corruption. It would also deepen its engagement in states where poverty is increasingly concentrated, such as Orisa and Bihar in India and Sindh in Pakistan.
IBRD lending in the past year focused on helping South Asia close its infrastructure gap with road and irrigation projects. Looking ahead, the Bank would broaden its commitment to infrastructure with the first hydro project in a generation up for consideration early in the fiscal year just started.
IFC's investment commitments in the South Asia region reached $1.07 billion for 30 projects in FY07, and it mobilised an additional $102 million through syndications. Its portfolio spreads across eight sectors in Bangladesh, Bhutan, India, Maldives, Nepal, and Sri Lanka. The financial and manufacturing sectors are the largest with infrastructure displaying the most rapid growth.
Three quarters of $2.6 billion of the disbursed and outstanding regional portfolio is in India, with Bangladesh at $147 million, the second largest. Private sector projects worth $3 billion were supported as a result of IFC's assistance to the Indian corporate sector.
IFC doubled its committed portfolio in India in the infrastructure sector to $600 million. Investments ranged from natural gas to wind power and from port services to a fund for developing public-private projects in infrastructure sector.
Also active in the region is Miga, which provided $76.4 million in insurance guarantees in support of three investments and undertook two technical assistance projects in the region, including support for the new Bangladesh Investment Climate Facility. To date, Miga has issued $640 million in insurance guarantees for foreign direct investments in South Asia.
In the past year, Afghanistan received a major cash injection with a Miga-backed investment in a state-of-the-art telecommunication network. The $85 million project represents roughly a third of total flows of foreign direct investment into the country from March 2006-07 (the Afghan calendar year). This is the fourth investment guaranteed by Miga in Afghanistan.
Equally important is the World Bank's knowledge assistance to South Asia. The Bank delivered over 90 analytical and advisory activities, ranging from a detailed exposé of Afghanistan's drug economy to an analysis of Sri Lanka's plantation sector to the economic impact of HIV/AIDS in India.
This year also saw earlier Bank analytical work having policy impact. Estimates of teacher absenteeism in India, for example, have contributed to a shift in the focus of India's major primary education program towards improved education quality.
In response to the Bank's Doing Business report, the Indian government set up a Committee of Secretaries in November 2006. This Committee has directed that action is taken to reduce the time and cost of doing business in the country.