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India figures among the World Bank's top ten borrowers

India figures among the World Bank's top ten borrowers this year with a loan of $ 2.14 billion. This would have touched an all-time high mark of over $ 3 billion but for the intervention in May of the US nuclear-related economic sanctions.

''Uncertainty about the economic prospects of the region increased, following the detonation of nuclear devices by India and Pakistan in May 1998 and the resulting imposition of economic sanctions by several industrial countries,'' says the bank's annual report for 1998 which was released in Washington yesterday.

It says that at the request of some executive directors, consideration of several non-basic human needs loans, which were scheduled to be presented in the last quarter of fiscal 1998, were postponed.

According to report, the United States was instrumental in blocking India's three loans, totalling $ 865 million. The action was in pursuance of sanctions it had slapped on India. These loans were against two energy projects and another dealing with road transport.

The World Bank had agreed to India's plea for increased credit this year to develop its infrastructure necessary to retain the high growth path. But the tempo of allocation of loans slowed down after the nuclear tests. If the three loans, which had been deferred at the US initiative, had gone through as originally slated, India's loan tally for the year would have crossed the $ 3 billion mark.

Besides India, the nine others in the list of top borrowers are: South Korea ($ 5 billion), China ($ 2.6 billion), Mexico ($ 1.7 billion), Russia ($ 1.6 billion), Brazil ($ 1.6 billion), Argentina ($ 1.3 billion), Pakistan ($ 807 million), Indonesia ($ 703 million) and Ethiopia ($ 669 million).

As usual, it got the lion's share in the World Bank's lending to South Asia. India totalled $ 1.06 billion from the World Bank and $ 1.07 billion from its concessionary lending agency, the International Development Association against 11 projects last year.

India was followed by Pakistan which received $ 808 million for four projects. Bangladesh had total loans of $ 646 million (all IDA credits) for four projects, Sri Lanka $ 134 million, Nepal $ 128 million and Bhutan $ 13.7 million.

In fiscal 1998, new World Bank lending commitments to the South Asian countries reached about $ 3.9 billion for 25 projects. This is the highest level since 1989 and nearly double the amount provided in the previous fiscal year.

The greatest share of regional lending in 1998 went to rural development projects $ 876 million. Lending for human development showed a significant increase over previous years, including $ 718 million for primary and secondary education projects, $ 626 million for health, population and nutrition projects and $ 543 million for a multi-sector social protection project.

Lending for power ($ 295 million) and mining ($ 532 million) and for public sector management ($ 250 million) also accounted for a significant share of the 1998 portfolio.

Analysing the region's economic prospects, the report says that at 5.2 per cent in 1997, south Asia's gross domestic product was down almost one per cent from 1996, mainly due to sluggish demand and stagnation in India's industrial sector and low cotton output in Pakistan.

Estimated growth rates in fiscal 1998 are 5.5 per cent in Bangladesh, 5.1 per cent in India, 5.4 per cent in Pakistan and 5.8 per cent in Sri Lanka.

The report says that fiscal deficit in India rose to an estimated 6.1 per cent of GDP compared to fiscal 1997 second half deficit of 4.9 per cent, despite continued efforts by the government to reduce spending.

Estimates indicate that Bangladesh's deficit remained unchanged from fiscal 1997 at 5.3 per cent of GDP, Pakistan's fell to 5.4 per cent from 6.3 per cent of GDP and Sri Lanka's to 6.5 per cent from 7.6 per cent of GDP in fiscal 1997.

The report also notes that due to increased disbursement from official creditors, the region's long-term external debt rose by three per cent, reaching $ 142 billion in 1997. A nine per cent rise in export revenues led to an improvement in the debt-to-export ratio, which fell from $ 194 per cent in 1996 to $ 183 per cent in 1997.

Despite this decrease, the World Bank document points out, the ratio still exceeds the average for all developing countries (136 per cent in 1997). Short-term external debt remained low, a factor that may have helped prevent spill over from the east Asian financial crisis.

It says financial sector regulations, which prohibited banks from fuelling large credit booms and small current account deficit also helped the region avoid financial crisis.

According to the report, growth in private capital flows levelled off in 1997 after jumping from an average of five billion dollars in 1996. India continued to attract the bulk, with net foreign direct investment flows rising to $ 3 billion in 1997, a 20 per cent increase over the previous year.

UNI