IMF and the World Bank


Over the years developing countries have, as a group, experienced severe economic instability and difficulties. Many of these countries were hit by a real blow in the early 1980's, and again in 90's. The main problem these countries are facing time and time again is the debt crisis. These countries borrowed extensively from the Western creditors, which includes, banks, developed countries, and from institutions like the IMF and the World Bank, and then they were unable to repay loan. Developing countries required loans from creditors in order to keep their economies running. Creditors provide loans to finance development projects in the belief that such loans would generate more income for the coountry and help the economy to flourish, which would eventually lead to reducing the dependency on foreign loans. Although many critics such as Stigltz, J. (2000); Sobhan, R. (1996); Loxely, J (1986) viewed that in practice, loans do not turn into investment, and in many developing countries become an important source for financing current consumption, both on public and private account. Moreover, Cooke, B. (2003); Bird, G. and Milne, A. (1999) and George, S. (1988) all pointed out that because of corruption of the governments and their allies, and the public administration, a greater portion of the loans go into their pockets instead of utilizing towards the development. Government takes loans in whatever project possible but many of those projects are either not completed or unsuccessful to bring any good. Mainly for these reason the developing countries are still dependent on foreign loans and unending cycle is formed.

When giving loans to developing countries, creditors attached many conditions. These conditionalities included reform programs, which are formulated to lead the developing countries on the path of development. In the current study, I am going to evaluate the effectiveness of these reform programs particularly the reform programs prescribed by the IMF and the World Bank; with special reference to a developing country in South Asia Bangladesh.

Working for the development of developing countries, the IMF and the World bank provide the loans for these countries in various circumstances and projects. The World Bank introduce the projects, lend the money for these projects in the hope that it will lead to sustainable development and reduce poverty. On the other hand, the IMF's main role is to reduce imparity between balance and payments, reduce poverty, increase employment, all of which can lead to faster economic development. The loans of the IMF and the World Bank come with their prescribed reform and conditionalities. Implementation of these reforms and fulfilment of the conditionalities are very important for the developing countries, as it not only ensures acquirement of future loans but also other developed countries and financial institutes monitor and evaluate the implementation prior to giving loans to a developing country.

The IMF and the World Bank's reform program and conditionalities are also widely known as Structural Adjustment Programs (SAP). Structural adjustment programs require that in exchange of the growth oriented loans a country must accept a packet of reforms that include - liberalization of imports, privatisation of state industries, full privatisation of land tenure, abolition of restrictions of currency exchange and commodity prices, demise of the subsidies and constant devaluation (Fedrici, S. 2001). The reform programs of the IMF and the World Bank are highly praised in the way it brought stability in Latin American and South East Asian countries during the economic crisis in the early 90's.

The reform program have also been highly criticised by various scholers, development workers and political leaders, as they claimed that through the reform programs the IMF and the World Bank look after the interests of the developed countries at the detriment of developing countries. Various conditionalites of the structural adjustment program have also been criticised by critics; they viewed that many of conditionalities were not going to achieve the development, rather the country have will end up paying excessively for the drastic measures. For example, the IMF and the World Bank prescribed liberalization of financial markets, but many of the developing countries do not even have the suitable environment to implement it. In this context, Chang, H. (1998) said, “the success of liberalized financial markets depend on numerous prerequisites many of which are not met in the developing countries and cannot be transplanted easily”.

In this study I will try to examine the effectiveness of the IMF and the World Bank certified reform programs in Bangladesh. Development programs of the country largely depend on the foreign loans. The country took a huge amount of loan since it's independence. The IMF and the World Bank listed Bangladesh in their Highly Indebted Poor Countries. In the year 2000, the Debt/GDP ratio of Bangladesh was 33.6% and the Debt Service/Export ratio was 9.5% (cited at,, on 25/08/06).

In an attempt to meet the research's aim the, the present paper critically reviews the current literature to find out the definition of the reform programs of the IMF and the World Bank, identify the effectiveness and constraints of the reform program, and evaluating the situation the way reform is performing in Bangladesh. Employing a broadly interpretive social constructionist approach, the next section aims at identifying and justifying the methodological approach undertaken, with specific reference to the use of elements originating in the social constructionist approach to grounded theory for the conceptualization and interpretation of data, as well as the research's design, procedures and tools. The subsequent chapter aims at analyzing the insights gained from officials to illustrate how reform is implementing in Bangladesh, it's effectiveness, and constraints. Drawing upon established literature, the paper then seeks to illustrate how such insights contribute or challenge perspectives in the literature and as such propose areas of further research as informed by the study's conclusions.

2. Literature Review

A country needs to take loans from various financial sources to run its day to day activities. According to the national newspapers, Bangladesh government took around 10 million pounds from the national private and public banks within the first four days of the new financial year 2006-2007. From the perspective of the developing countries, their combinations of low income and poorly developed financial capital markets lead to insufficient domestic savings to provide the finance for domestic investment. As the capital stock is relatively low it means that there are plenty of opportunities for profitable investment and low capital to labour ratio means that the marginal productivity of capital is high. When a developing country borrows money from abroad they can raise domestic investment above domestic savings, which in turn leads to a higher rate of economic growth than in the absence of such borrowing. Pilbeam, K. (2006) viewed that “ the investment then exceed domestic savings implies that the country is running a current account deficit the counterpart of which is the capital inflow on the capital account”.

Historically in the first decades following decolonisation, first world and multi lateral creditors such as the World Bank and the International Monetary Fund (IMF) lend massively to developing countries. Money was frequently directed towards massive infrastructure projects such as dams and highways. Additional funds focused on an import substitution model of development creating a capacity to replace imports from industrialized countries.

The banks and the other financial institutions do not mind giving loans to developing countries as they think a country cannot be bankrupt. Those financial institutions see developing countries as the business opportunities where they can give loan, get the interest for the loan. As George, S. (1988) observed, “in the third world, bankers have not been lending money, they have been brokering money. The very service of recycling for which so many bankers flatter themselves speaks of money changing, not of investment”. Citi Corp., One of the leading banks, which lend money in the third world summed it best by saying “our strategy is not one of making loans, our strategy is one of making money”.

The country, which takes the loan, has to pay interest for the loan as well as repay the loan. The developing countries are highly depended on these loans. According to Jubilee Debt Campaign's website (cited at., on 17/08/06) “total external debt of low income countries is around $523 billion and these countries are paying around 90 million US$ everyday for the debt service”. Slowly but surely the debt become a burden for these third world countries and lead to the crisis not only for them but also for the whole world economy. Debt crisis is a double edged sword it both compromises the development of a number of Third World countries, and endangers the stability of world financial markets by raising by the specter of debt defaults (Muscatelli, V. A. and Vines, D., 1990).

The world realized the depth of the debt crisis in the early 1980s when Mexico failed to make its repayments, followed by Brazil and Argentina. The whole world economy fell into a crisis at that time. Fortunately, after some drastic measures, the World Bank and IMF were able to solve the crisis but debt still remains quite a big issue in today's world. IMF and the World Bank identified 15 countries as Highly Indebted Poor Countries (HIPC).

For this study, researcher focuses on the loan given by the IMF and the World Bank and the effectiveness of the reform programs, which prescribed conditions for the loan, and the literature review also focuses on that.

2.1. The Role of the IMF and the World Bank in the Loan Program

Third World countries are high-risk borrowers, the IMF and the World Bank play a significant role not only in giving them loan but also negotiating or guarantee credit worthiness for loan from the other financial institutions or donor countries. As the world's leading loan officers, the IMF and the World Bank exerts substantial power in international debt renegotiation and restructuring. They provide credit worthiness and then provide suggestions or reform programs for repaying existing or additional loans. According to Bradshaw, Y. K., Huang, J. (1991) “ appropriate adjustment policies in debtor countries are clearly needed to foster what Directors [of the IMF] called the normalization of debtor-creditor relationships, which in turn encourages the restoration of the debtors credit worthiness, greater spontaneous bank lending, official credit flows, official development assistance”.

A country must establish a track record of good performance under the IMF and the World Bank supported programs with (cited at, Vallee, O. and Vallee, S. 2005) “(I) the satisfactory implementation of key agreed- upon policy reforms, (II) the maintenance of macro-economic stability, (III) the adaptation & implementation of poverty reduction strategy program for at least one year”.

The IMF and the World Bank play such an extensive role in negotiating loans for the Third World countries and thus impose their policies that the former Tanzanian President in a speech (cited at Loxely, J. 1986) said “When did the IMF [the World Bank] become an International Ministry of Finance? When did the nations agree to surrender to it their power of decision taking?”.

The Bank and the Fund works closely together in the developing countries. The Bank look to the Fund for views on exchange rate, monetary, fiscal and foreign borrowing policy including the establishment of medium term targets for the current account of the balance of payments. While the IMF look to the Bank for views on development priorities as reflected in the size and composition of the investment program, recurrent outlays in development sectors, the efficiency of the resource use and micro pricing decisions.

In next two sections an overview were given about the IMF and the World Bank. How they operate, what are the aims and objectives.

21.1. The IMF

Agreement for the creation of the International Monetary Fund came at the United Nations Monetary and Financial Conference in Breton Woods, New Hampshire, United States, on July 22, 1944. The principal architects of the IMF at the conference were British economist John Maynard Keynes and the chief international economist at the US Treasury Department, Harry Dexter White. On December 27, 1945 the first 27 countries signed the Articles of Agreement. The organization came into existence on May 1, 1946, as part of a post-WWII reconstruction plan, and it began it financial operations on March 1, 1947. It is sometimes referred as the “Breton Woods institutions”. Bird, G. (1994) described the reason of creating the IMF as “to encourage international cooperation to cope with recession and protectionism on a world scale and to discourage individual countries from pursuing policies that would beggar their neighbors and eventually themselves”.

The IMF describe itself as “an organization of 184 countries working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty”(cited on, 20/04/06, at With the exception of North Korea, Cuba, Liechtenstein, Andorra, Monaco, Tuvalu and Nauru, all UN members' states either participate directly in the IMF or are represented by other member states.

According to the “Article of Agreements” IMF's main responsibilities (cited on, 20/04/06, at -

* “promoting international monetary cooperation;

* facilitating the expansion and balanced growth of international trade;

* promoting exchange stability;

* assisting in the establishment of a multilateral system of payments; and

* making its resources available (under adequate safeguards) to members experiencing balance of payments difficulties”.

2.1.2. The World Bank

World Bank describes their main activity as “Working for a poverty free world”. Like the IMF, World Bank was also established in the United Nations Monetary and Financial Conference in Breton Woods, New Hampshire in 1945. The Bank came into formal existence on 27 December 1945 although at that time it was called International Bank of Reconstruction and Development. The World Bank is a group of five international organizations responsible for providing finance and advice to countries for the purposes of economic development and poverty reduction, and for encouraging and safeguarding international investment. The group and its affiliates have their headquarters in Washington, D.C., with local offices in 124 member countries. Currently 184 countries are members of the Bank.

As mentioned at the beginning, of the mission of the Bank is to alleviate poverty. As a result the Bank concentrates on building the climate for investment, jobs and sustainable growth, so that economies will grow, and by investing in and empowering poor people to participate in development. In order to alleviate poverty the Bank's main focus is on the developing countries, which is widely known as the less developed countries. The main development programs of Bank includes in fields, such as human development (e.g. education, health), agriculture and rural development (e.g. irrigation, rural services), environmental protection (e.g. pollution reduction, establishing and enforcing regulations), infrastructure (e.g. roads, urban regeneration, electricity), and governance (e.g. anti-corruption, legal institutions development).

It provides loans at preferential rates to member countries, as well as grants to the poorest countries. Loans or grants for specific projects are often linked to wider policy changes in the sector or the economy. According to the Bank's website (cited on, 21/04/06 at,,,contentMDK:20103853~menuPK:1697035~pagePK:51123644~piPK:329829~theSitePK:29708,00.html), the Bank is currently involved in more than 1800 development projects in the developing countries and provided 20.4 billion US dollars for 245 projects in the year 2005.

2.2. The Reform Programs

Governments of the developed countries and international financial agencies press for the conditions or the reform programs while they give loan to the developing countries. By imposing these policies they assumes that, the reform will stabilize the economy to profitable practices. In some time doing so sometimes they don't consider even the social cost debtor country have to pay. According to Jonakin, J., Stephens, M. (2004) “reform came disproportionately at the expense of poverty programs, wages, employment, and public services for working and peasant classes who received from the borrowings.

Stigltz, J (2002) described the reform as a strategy to make sure the loans are paid back at the same time to ensure the loans are used effectively. The donors' belief that if there is no condition for the loan the country might not use it for the purpose it given or even if it does, it might implement the economic policies, which support the loan funded programs. In a sense, without the conditions for the reform the third world countries would become aid dependent. According to Sobhan, R. (1986) “countries who disburse loan on easy financial terms are more likely to expect recipients to be dully differential to their advice and interest. Cheap loan contribute to the addicts dependence on aid as the solvent for low performance and poor domestic resource mobilization”.

Both the IMF and the World Bank are playing an extensive role in determining the conditions of the debtor countries to sign for the reform programs before giving a loan. If the country fails to implement the reforms or slow in implementing them, the IMF and the World Bank might withdraw the loan as happened in the case of Bangladesh. Because of the slow implementation of the prescribed reform programs IMF turned down $9 million and the World Bank turned down around $20 million as loan. Moreover, based on how a country implements the reform programs of the IMF and the World Bank, the donor countries or other financial institutions give loan to the third world countries. As a result Bradshaw, Y. W., Noonan, R., Gash, L., Sershan, C. B. (1993) highlighted those two institutions as the ‘policy advisor' as well as ‘credit rating service'.

The IMF and the World Bank pressure or conditionalities i.e. policy prescription or reforms that all parties (these include borrower countries, the IMF and the World Bank advisors, and potential lenders whether they are Bank or the IMF/ World Bank itself) formally agree to as a condition for new or renegotiated loans. The IMF and the World Bank have a set of pre prepared reform programs for all the debtor countries which the country has to implement. Now, to which extent the reform to be implemented varies from country to country. According to Chowdhury, A. & Sugema, I. (2005) “a long list [of reform] of donor [IMF & World Bank] may reflect a lack of confidence or trust in the government. The longer & complex were the conditions the more difficult they were to implement”. Now in most of the cases both of theses institutions do not consider whether the country has the ability or not. Floxley, A. (1987) viewed this as, “instruments for achieving these goals [the reform] should be tailored to the specific characteristics of each country. These criteria contrast with the current concept of policy conditionality, which assumes that a particular instrument of economic policy if caused in a certain way, will necessary produce the same results in any context”.

Over the years the World Bank and the IMF emphasizes the reform programs, which is known as structural adjustment programs (SAP). George, S. (1988) describes the structural adjustment programs as “[the member country] shall adopt policies that will assist them to solve their balance of payments problems…and that will establish adequate safeguards for temporary use of its resources. The most frequent elements of an adjustment programs include devaluation of the currency (to discourage imports and encourage exports); drastic reduction of government expenditure, particularly social spending and elimination of food and other consumption subsidies; privatization of government enterprises and/or increases in prices changed by them (electricity, water, transport etc.) and the abolition of price controls; ‘demand management' (meaning reduction of consumption) through caps on wages, along with restrictions of credit, and higher taxes and interest rate in an effort to reduce inflation”.

The IMF and the World Bank put emphasis on implementing the reforms so that debtor countries can reduce the balance of payments, lead to facilitated balanced growth of industrialization and through this, contribute to high levels of employment and real income and the development of the productive capacity. In Wikipidia website (cited at. , on 15/08/06) explain the benefits of the structural adjustment programs as “ structural adjustment programs are designed to promote economic growth, to generate income, to payoff debt which the countries have accumulated”.

When a country takes a loan they are running on the borrowed times and eventually they have to make reforms to balance their budgets or control inflation and if these conditions are not implemented the country can expect bigger problems. On the contrary, Loxely, J. (1998) illustrated the benefits of the reform as “structural adjustment seeks to improve external balance both by reducing total expenditures and therefore, those on imported goods, and by freeing up goods for export by restraining domestic spending. Curbing demand also serves to reduce inflationary pressure, which in turn may further strengthen the balance of payments. Structural adjustment stimulate production through price incentives and to switch the composition of output and demand in such a way as to boost exports and investment and reduce imports and consumption”. Thus, the structural adjustment programs overall developed a country's situation.

According to Bradshaw, Y. W., and Huang, J. (1991) “IMF and World Bank and private commercial banks argue that indebted countries must implement structural adjustment policies to save money and facilitate exports thereby facilitate development”. Ocampa, J. A. (2004) in his research found that reform program of the IMF and the World Bank was highly successful in Latin America, according to him “the [new development] strategy has been effective in generating export dynamism, attracting foreign direct investment and increasing productivity in leading firms and sectors. In most countries, inflation trends and budget deficits were effectively brought under control and confidence in macroeconomic authorities increased. Reflecting the democratization wave that simultaneously swept over the region, social spending rose and innovations were introduced in the way social policy is undertaken”. Following the IMF and the World Bank prescribed reform programs the whole region improved a lot of their economic scenario, which, hit rigorously during the 1990's debt crisis. Satisfied with the success of the reform program in Latin America IMF's director for the Latin America in a speech said (cited at. Charnock, G. 2006) “nowhere did more government neo liberalism [reform program] than in Latin America. Stronger macroeconomic management [structural adjustment] has helped to contain and reduce fiscal deficit and debt across the region”. It is not only Latin America where the structural adjustment has been successful but also in Indonesia and other parts of South East Asia after the Asian crisis of the 90's, structural adjustment played a vital role for the economic development of the region. Chowdhury, A. and Sugama, I. (2005) viewed the success, as “one of the commonly cited reason for the success of the Indonesia is policy reform as a part of IMF/World Bank adjustment programs”.

In September 2000, the United Nations declared its “United Nations Millennium Declaration” which 118 of its member countries signed. The main objective of this declaration was to achieve the eight goals which are commonly known as ‘Millennium Development Goals' by the year 2015. The UN described the ‘Millennium Development Goal' (cited at Wagner, C. G., 2005) as “to establish global partnership for development which would address transparency in government and business, as well as deal with the debt problems of developing countries among other issues”. The IMF and the World Bank are an integral part in achieving ‘Millennium Development Goal'; and also have changed their reform program. Structural adjustment has been replaced by an emphasis on poverty reduction with developing countries encouraged to draw up ‘Poverty reduction Strategy Papers (PRSPs)'. The IMF and the World Bank identified 70 low income countries; around the world and the ‘Poverty Reduction Strategy Papers (henceforth is going to be called as PRSPs)' are the basis for the provision of debt relief in these countries. According to IMF's website (cited at., on 15/08/06) “poverty reduction strategy papers are prepared by the member countries through a participatory process involving domestic stakeholders as well as external development partners, including the IMF and the World Bank”.

PRSPs emphasis the reduction of poverty, and debt of the poor countries. The IMF and the World Bank always keep the same old structural adjustment programs in the name of the PRSPs. If we looked at the PRSPs of Bolivia as an example (cited at., on 15/08/06), in its PRSPs action plan the country agreed to reduce social spending, attracting foreign investment by liberalizing the market, restructuring the revenue policies to collect more revenue which will help to decrease the budget deficit. All of those conditions had already been prescribed anyway in the structural adjustment program in the past.

Again, although the IMF and the World Bank are saying that the country is the integral part and they themselves make the PRSPs, in reality, the country is only signing the documents, which had been prescribed, by the IMF and the World Bank beforehand. For example in a seminar in Dhaka, Bangladesh honorable minister of ‘Science and ICT' of Bangladesh literally threw away the PRSPs by saying (cited at, The Daily Star 06/08/06) “it is worthless and carries no importance to me. The document was not placed before the parliament for the discussion. It has been formulated on keeping with the interest of the donors, not suiting peoples needs”.

2.3. Constraints of Reform

Despite the pressure from the IMF and the World Bank and their constant monitoring whether the reform is going on in the proper direction or not, the reform program is highly criticized. The reform did not work well in most of the countries where it was implemented. It may solve the problem for the debt in the short term but did not achieve the goal of making the country sustainable. Stigltz, J. (2002) former chief economists of the World Bank viewed the reform as “eliminating the tax barriers and tax distortions may enhance long run growth but the disturbances to the economy as it strives to adjust may only deepen its down turn”. As in the case of Indonesia, although the reform was a success but many criticize the reform as the cause of the crisis of 90's.

The IMF and the World Bank had to change the reform time and time it had backfired in the case of Indonesia. According to Chowdhury, A. and Sugama, I. (2005) “there have always been policy reversals… these policy reversals indicate that the Indonesia less than committed to reforms. Indonesia agree to these structural reform agenda under duress. These raises question about the effectiveness of conditionality based lending linked to policy reforms”.

In the case of Mexico, critics like Stigltz, J. (2002) and Cook, B. (2003) acknowledge that the reform of the IMF and the World Bank the country have to face the ‘Peso Crisis' of 1994. In Africa the countries have to pay highly for the reform program of the IMF and the World Bank. Fedrici, S. (2001) in his research found that “the Nigerian debt rose from $20 to $30 billion after a SAP was introduced; while Africa's total external debt has tripled since 1980, is [now] as large as the continent's GNP”. The writer criticizes the reform program that “debt crisis and SAP resulted the demise of local industry”.

Again the tools, which are used for the structural adjustment, are also not suitable in different countries conditions. In order to find out the effectiveness of the reform program Bradshaw, Y. W. and Huang, J. (1991) came up with three finding these are -

“ (I) Devaluation leads to inflation and reduced individual purchasing power, thereby harming economic development and quality of life. (II) reduced government spending eliminated food subsidies and other state enhanced programs that enhance living standards. (III) wage freezes and reduced government employment mean that (a) rapid inflation exceeds individual earnings and (b) unemployment raises because the state is a major employer”. So it can be said that instead of improving the country's condition the reform leads the country in more worse situation. According to Walkenhorst, P. (2003) “some basic assumptions of reforms proved to be entirely wrong particularly the assumption that low inflation and better control of budget deficits would ensure stable access to international capital markets and dynamic economic growths, and that higher productivity in leading firms and sectors would automatically spread through out the economy, leading to a broad acceleration of economic growth”.

Former President of Nigeria Kaunda (cited at Bradshaw, Y. K. and Huang, J., 1991) described his country's situation after the implementation of the reform programs as “the program has been with us for close to 12 years now and we began to see nothing but a contraction of the economy and in the end we were living to pay the IMF, and nothing else! We were not developing the economy was not expanding, it was contracting”. As the President mentioned in his speech the reform programs were in place only so that the country can earn enough to ensure debt repayment not to improve a country's situation. Many critics agree with this view. According to Floxely, A. (1987) “IMF [and the World Bank's] key function was to put pressure on countries and banks to maintain payments flows and minimum level of credit that were essential to prevent ‘debt bomb' from exploding”.

By introducing reform program in a country the IMF and the World Bank also make conditionality of the more liberalized economy. Now the reason for doing this was to attract more foreign investment and gradually they will enjoy the benefits of the globalization. The benefits of the globalization are (cited at, Dowrick, S. and Colley, J., 2004) - “ the ongoing process of greater economic interdependence among countries, reflected in the increasing volume of international financial flows and increasing flows of labor”. But the problem is mentioned by Dowrick, S. & Golley, J. (2004) “many of the less developing countries subsequently liberalized trade, perhaps under pressure from the IMF and the World Bank, did so without introducing the appropriate internal policies and institutions only to find out that trade reform alone was not the magic solution”. Chang, H. (2005) analyze the growth rate under the trade liberalization process and finds out that, “the growth records of the developing countries during the last two decades of trade liberalization also suggests that the removal of protection and subsidies has lead to a slow down rather than an acceleration of economic growth”.

The IMF and the World Bank are make the reforms and they are pressurizing countries to implement them. No major economy project can be carried out without their approval, storms of foreign offers descend on the country in order to check its account books and no government can be politically independent when every few months it must plead with foreign agencies for debt rescheduling or new loans. In a simple way it can be said that through the implementation of the reform program the IMF and the World Bank make the developing country a slave for the developed worlds. According to Vallee, O and Vallee, S. (2005) “super powers exercise a great deal of control over other nations through debt alleviation and poverty reduction strategies and programs”. Loxely, J. (1986) previously commented in this context in much the same way “because of the realities of the distribution of the world economic and political power, the Fund's [& the World Bank] on global issues largely mirrors of the industrial capitalist nations and specially the United States government”. In the past US Treasury Secretary Ronald Regan directly said (cited at, George, S., 1988) “the IMF and the World Bank are essentially non political institutions… but this does not mean that the United States political and security interests are not served by them”. In the Meltzer Commission report of 2000 (cited at, Bird, G. and Rowlands, D. 2001) IMF and the World Bank are described as the vehicle of G7 countries specially USA's to achieve their political ends.

IMF and the World Bank impose and pressurize a country to implement the conditionality while ignoring in what extent the reforms are going to be implemented. Floxely, A. (1987) mentioned in this context “IMF and the World Bank should not, as it frequently does, apply a rigid conditionality for the international adjustment of the economy. Rather it should leave the country free to design its own domestic adjustment programs as long as the goals for the balance of payments and balance of trade are met”. According to Bradshaw, Y. K., Noonan, R., Gash, & Sershen, C. B. (1993) “reform may impose western oriented economic policies that are not entirely appropriate in the Third world settings”. The instrument for achieving the goal for development should be tailored to the specific characteristics of each country.

Reforms can be successful if the debtor country made the reform program themselves and implemented it with the help of the IMF and the World Bank. Onis, Z (2006) suggested that the debtor countries should go beyond the IMF and the World Bank's reform policies and make their own programs according to their domestic capacities and competitiveness of their economies. The reform also required the willingness of the country's government to implement it properly. As good reform policies produce favorable outcomes, Rodrik, D. (1996) said “implementation of the good reform policies is often viewed as requiring ‘strong' and ‘autonomous' (not to say authoritarian) leadership”.

2.4. Overview Bangladesh

Depending on the loan from the donor countries and other financial institutions is not a post liberation phenomenon in Bangladesh. It had already begun inflecting the regional economy in the 1960's. The systematic resource drainage of Bangladesh's resource through mechanism of foreign and then internal colonial exploitation left the economy at the outset of liberation on 1971 with a large external resource gap. Neither passing of the time nor the change of the regime has contributed to reducing the burden of dependence on foreign loans. Over the years the loan has become an integral prop of the old order, militating any pressure to generate internal resources or mobilize the masses to collective effort. Sobhan, R. (1982) describes the situation of Bangladesh as ‘hat in hand seeking aid'. In the past much of this loan had been costless and didn't have to be repaid through gearing up the levels of output and exports and there is no material compulsion to use the loans more efficiently. Sobhan, R. (1982) suggested that this contributed to the addict's dependence on loan as the solvent for low performance & poor domestic resource mobilization.

Donors provide the loan to finance development in the belief that such loans would raise the rate of domestic investment and savings. The resultant higher investment would generate higher incomes, which in turn would raise savings to the point where the investment-savings gap would be closed at a higher level of income. But according to Sobhan, R. (1992) “in practice however, loan did not translate into investment, and in many developing countries became an important source for financing current consumption both on private & public account”. Same thing happened in the case of Bangladesh; donor's loan came to finance public expenditures on current account because government departments reclassified their recurring expenditures as development expenditures.

After the liberation of Bangladesh two military governments ruled it. Both of those governments in a bid to gain public support used the loans in wasteful manner. Snider, L. W. (1990) suggested that “the weaker a government politically the more it resorted to foreign borrowing from [commercial] creditors to cover the gap between revenue and public expenditure”. In 1989 the World Bank initiated Financial Sector Reform Program for the reform of the banking sector. The reform was a serious failure. In order to find out the reasons for the failure the researcher found the following reasons (cited at, Sobhan, R. 1998) -

“ i. Inappropriate sequencing of the financial sector reforms which failed initially to recognize the governance factor in leading the reform process.

ii. Reforms should have been preceded by fiscal restructuring and deregulation of labor markets, foreign trade and domestic prices. These interlinkages of adjustment measures were not taken care of, leading to excess liquidity.

iii. An adequately strong financial infrastructure (legal framework, effective supervision, regulatory role of Bangladesh Bank) should have been put in place before the reforms were initiated.

iv. The initial emphasis under the Financial Sector Reform Program for disinvestments of the National Commercial Banks was made without the serious study of the importance of the nature, role and politics of banking regulation in Bangladesh”.

Thus in a sense the prescribed reforms of the IMF and the World Bank didn't work as they were not prescribed according to the country's political and economic situation. Akash, M. M. (1998) identified in his research how the IMF and the World Bank's prescription failed in Bangladesh, according to him -

“ a. Some conditionalities of the donors were acceptable to the Government but not to the people. Here the Government of Bangladesh made no serious effort to mobilize neither political support in parliament nor popular support within civil society or even amongst beneficiaries behind the conditional reform package.

b. If the pace of adjustments is too rapid then it causes much pain to affected social groups. Depending on the strength of such groups some policies become politically infeasible. For example, a sharp elimination of agricultural subsidies in one or two years may lead to severe shock to some farm groups who may resists such pressure by putting pressure on the government.

c. A too rapid reduction of tariff has a revenue reducing effect which needs to be seriously considered before tax reforms are put in place. In most cases the government did not have the capacity to implement a compensatory move to increase collections from direct taxes”. All these findings of the research again showing that not measuring the country's capacity t implement the reform program and prescribing a generalized reform program led to the failure of the whole program.

During this time reform caused a substantial problems for the Bangladesh's economy rather than improved. Sen, B. (1998) identified some of those problems, which were caused by the IMF and the World Bank prescribed reforms-

“a. The IMF and the World Bank did not segmentically prioritize institutional efficiency and reform over macro policy.

b. The pressure for devaluation contributed to the rise in the budget deficit by increasing the cost of foreign debt and debt service changes. It also generated the inflationary pressure due to a rise in cost of direct and intermediate imports.

c. The adjustment measures actually led to decline in investment during the period 1982 to 1987. The budget had been balanced during the period 1987 to 1991 by continuously cutting development outlay because of adjustment needs. This had lowered the GDP growth rate.

d. Structural adjustment program severely hit the agriculture sector by withdrawing all the subsidies on fertilizer and irrigation equipments. World Bank suggested to compensate the farmers procurement price might be increased. But the government did not have an institutional capacity to ensure that a higher procurement price would actually reach the growers at the grassroots level. Moreover, since a large minority of the growers were subsistence producers, and hence did not generate a net marketable surplus, higher procurement prices did not compensate for withdrawal of input subsidies”.

Although the reform was a failure in most of the cases and caused more problems rather than lead to development World Bank and the IMF continued imposing more and more conditionalities for reform. Sobhan, R (1998) observed that over the years on an average the number of conditions had marked a significant increase. Its not only the condtionalities that increased, they also increase their pressure to interfere in the governments day to day activity. Few days back a news published in one of the national newspaper of Bangladesh (cited at, The Jaijaidin, 14th July, 2006) where it stated that as the IMF was not happy with the way the reform was going they asked the government to provide all the sensitive and confidential information of the economy. According to the news many of the economists and the government officials of Bangladesh were astonished at the way the IMF extended their interference in Bangladesh's economic policy. The loan from the IMF and the World Bank is very important to Bangladesh's government. Mahmud, W. (1998) discussed the importance of the loan from the developing country like Bangladesh's perspective, according to him “loan is an important part for the financing of the revenue budget directly”. The IMF and the World Bank are not only the source of the loans but they also play an important role in getting the loan from other donors and financial institute. As a result all the governments in various regime in Bangladesh try to keep these two institutions happy and agree to all their conditionalities and reform. Ahmed, A. (2006, cited at The Jaijaidin, 14 July, 2006), a renowned economist of Bangladesh in an interview said “ as our government listen to the words of the IMF and the World Bank so they can impose all the conditionalites and the reform programs on us. Brazil, Argentina, India also took the loan from them but they did not listen to the IMF and the World Bank the way we do”.

Bangladesh had not face any debt crisis and till now debt is not a huge burden. For last few years Bangladesh is getting less and less loans from the IMF and the World Bank. According to a report in the Daily Star on 15 July, 2006 “ in the first 10 months of the fiscal year 2006 the foreign loans drop 12 percent from the previous year. The overseas loan the country received during the period July-April period of fiscal year '06 reached $ 979.11 while it was 1112.40 million on the corresponding period of the previous fiscal. Repayment of $393 million against previous debt to donor agencies also caused a 21 percent decline to the net foreign loan during the period”. As the foreign loan are declining the government started to borrow money from the Banks, in the same report it's stated that during the fiscal year the government borrowed around $72 million (around 5000 crore taka). On 2 August 2006 in a report in the Prothom Alo published that government borrowed $5 million (around 400 crore taka) within the first four days of the new fiscal year 2006/07. The government has to borrow all this money from the Banks to fill the deficit caused by the drop of the loan amount. According (cited at various reports published in the national newspapers) to the IMF and the World Bank as government had not fulfill the conditions of the reform programs and also because of the slow pace of the project implementation. Although the government had been claiming that it is fulfilling all the conditions for the reform on time. It been stated in country report of Bangladesh, which prepared by the IMF (2006) Bangladesh agreed to do the following reforms “(i) monetary and exchange rate policies to bring the financial program back in line with program targets, (ii) progress on tax administration reform, (iii) implementation of bank restructuring programs, and (iv) further adjustments in prices of petroleum products and natural gas”. But the government made the statement in the newspapers (cited at the various reports from the national dailies) it already took the step to privatize the nationalized commercial banks. As a first step of that government already took the initiative to sell it's share of the Rupali Bank to the private sector. As a part of the tax administration government established Anti Corruption Bureau and few days back government also appointed a Tax Ombudsman. With the oil price raises government always adjust the price according to it.

Although the IMF and the World Bank is prescribe the reforms the country did not progress as the way it should have. The GDP growth for the year 2005-2006 estimated only 5.5 percent, revenue collections fell short of the program target. The central government's overall deficit was contained to 3½ percent of GDP, about ¾ percentage point below the program. Growth momentum appears to remain strong, but inflation has picked up in recent months of the fiscal year 2006/07. The reforms have neither worked presently nor in the past. After coming back from the donors meeting on 14 August 2006 (cited at The Daily Star, 15, August, 2006) the honorable Minister of Finance and Planning told in a press conference said “I would say it's unfortunate that the big institutions like them (World Bank and IMF) could not feel the burden (of poor countries)”. Perhaps they also did not understand what is the right way to implement the reforms and whether the country has the ability to implement it or not. Ahmed, A. (2006) highly criticized the reform program suggesting, “because of the prescribed reform of the IMF and the World Bank Bangladesh is facing all the economic turbulence. As Bangladesh took the strict measures for the monetary policy it reduce the speed of the investment in the country. The GDP is not going beyond the 7 percent because we are listening and implementing their reforms. If we stick to their reform the country will face more problems”. In a seminar a renowned economist Mahmud, W (2006, cited at, The Daily Star, 06, August, 2006) suggested that government should devise a mechanism to examine whether the donors' strategies match the local perspective. It is true that government also did not take enough initiative to make the reform programs successful. As in the same seminar Sobhan, R. (2006, cited at The Daily Star, 06, August, 2006) said in his speech “government agree to implement prescribed reforms to get the loan not considering whether it can implement or not. And then to continue the loan the government just came up with some form of reform, which in reality did no good for the country”.

3. Research Methodology

The developing countries are highly depended on the foreign loans. The IMF and the World Bank are prescribing reform programs while giving the loan to a country. Other donor countries while giving the loans also evaluate a country's performance on how they are implementing the IMF and the World Bank's prescribed reform programs. The reform is supposed to lead the developing country on the path of development and reduce their dependency on foreign loans. This present study aims to explore whether the reform programs are working in the developing countries, if not then what are it's constraints. As such, the study's main objective is explore and evaluate the effectiveness of the IMF and the World Bank prescribed reform program as well as to find out how to make it more effective in a developing country such as Bangladesh.

3.1. Epistemology/ Ontology

As this current study tries to evaluate the efficiency and effectiveness of the IMF and the World Bank prescribed reform programs, it evaluate the social, political and economic perspective of the countries. As a result, it can be strongly argued that the study is going to be from a social constructionist's perspective. Within this view, the existence of an objective truth is rejected and as such it is believed that meaning is constructed through people's engagement with the world and the objects of the world (Cortty, 1998; Potter, 1998).

Peter L. Beger and Thomas Luckman developed the social constructive theory in 1966. The focus of the theory was to uncover the ways in which individual and groups participate in the creation of the perceived reality. It looks at the ways social phenomena are created, institutionalised, and made into traditions by human. Socially constructed reality is seen as an ongoing, dynamic process. Burger, P. L. and Luckman, T. (1967, cited at, Hacking, I., 1997) “all knowledge, including the most basic, taken-for-granted common sense knowledge of everyday reality, is derived from and maintained by social interactions. When people interact, they do so with the understanding that their respective perceptions of reality are related, and as they act upon this understanding their common knowledge of reality becomes reinforced”. Briefly social constructionist are interested in developing the theory that is derived from the real world to enhance understanding of how actors intersubjectively create, understand and reproduce social situations.

Jacobs, K. and Manji, T. (2000) suggested, “ a constructionist epistemology purports that an individual's experience is an active process rather than a passive material apprehension of an external physical world”. Constructionist research seeks to add to knowledge through the specific case chosen from. The constructionist recognizes, however, that the resulting account of the situation will be narrate that reflects and portrays not only the voice, experience and background of the researcher. According to Turnbull, S. (2002) “the constructionist seeks to find out a rich interpretation of a messy situation. This interpretative account will, it is hoped, generate both understanding and knowledge about the case. Ideas may also emerge that open and alter assumptions that can be carried forward to other cases displaying some similar characteristics in similar contexts”.

The current study expose such a philosophical perspective on the premise that understanding the reform program and build a theory to evaluate the effectiveness of the complexity of the reform programs prescribed for the developing country by the IMF and the World Bank. These reforms are very important to the developing countries for their everyday affairs. The study aims at focusing on contextualising the social, political and economic perspective through which the reform are taking place, taking the views of the officials and the pressure groups directly involved with the process as a starting point in understanding their views of their world.

3.2. Methodological Approach Used

To evaluate the effectiveness of the IMF and the World Bank's prescribed reform programs it is required to find out the real scenario in a country's perspective. It can be argued following Van de Ven and Yen (1992, cited at. Leonard, D. and McAdam, R. 2000) that “case studies specifically appropriate within grounded theory methodology where real life context are being investigated. Douglus, D. (2003) also described, “the distinctive advantage of grounded theory is that it commences from the specific ‘grounded in reality' situations with the intent of understandings the nature and rationale of observed incidents”. Moreover, the grounded theory have widely been used to explore a specific social phenomenon (Leonard, D. and McAdam, R. 2000; Shaw, E. 1999; Flick, U. 1998), as in the use of the present study.

Therefore, in the present study the grounded theory is being used. Originally developed by Glaser and Strauss (1967, cited at. Flick, U. 1998) Goulding, C. (1998) describes the grounded theory as, “the methodology that has been used to generate theory where little is already known, or to provide a fresh slant of existing knowledge”. Shaw, E. (1999) describes, “the grounded theory allows the researcher to enter into the social world in which they are interested and to have an empathetic understandings of participant's experiences of the social phenomenon under investigations”.

Charmaz (1983, cited at. Goulding, C., 1998) described the grounded theory as, “the main thrust of this movement was to bridge the gap between ‘uninformed' empirical research and empirically ‘uninformed' theory, by grounding theory in data”. Although Glaser (1992) argued that “its not always necessary to come with the new ideas by using the grounded theory since most ideas already known. But the result should be new connections between conceptual new ideas… which put a premium on the discovery and adept use of theoretical codes which are the connectors”. The fundamental weakness in the grounded theory according to Flick, U. (1998) is “it connected to theoretical sensitivity. Conceptualization do not emerge from the data. Their source is within the researcher and dependent on the extent to which he/she widely read in scholarly matters”. So, it can be said that even though the researcher tries to allow the conceptualization of the issue to emerge through the data it seems that there is an unavoidable tendency of resorting to already established source for making sense of the data.

As a researcher, when employing the grounded theory awareness should be made of this limitation. What should be important for the researcher for grounded theory is to capture the data rich in detail about the research subject and avoid the biasness not only while interpreting the data but also while collecting it. That is, for the purpose of the current study, the IMF and the World Bank prescribed reform programs considered as failure in the developing countries within the mainstream literature. While doing this the researcher should not aim to impose this conceptualization upon the informants. The researcher would try to examine the informant's concept to evaluate the efficiency of the IMF and the World Bank prescribed reform programs.

3.3. Research Design Overview

Its has already been mentioned that the study adopts a qualitative approach to the collection of the data under the social constructionist perspective, which allows individual's point of view, their understandings, and knowledge of the social phenomena (Reed, M. C. 2001). It gives the respondents enough space to explain their views regarding the issue.

3.2.1. Informants

The study concentrates on insights gained from a series of interviews with the officials who are directly involved with the reform process. The pressure groups always monitoring the reform programs of the government therefore, their interviews were also taken. The researcher conducted the interviews with the officials of the Economic Relation Department (ERD) of the Planning and Finance Ministry of the Bangladesh Government. There are several departments within the ERD who worked with different donors as individual. The researcher took the interviews of two senior officials who are seeing the IMF and the World Bank. As monetary policy is one of the main factor of the reform program the researcher also took the interview of one of the senior director of the Bangladesh Bank, the central bank of the Bangladesh Government. The officials from the World Bank and the IMF were also included as the informants for the research as it was necessary to review their view also. Other than that as a pressure group the researcher took the interview of one of the senior faculty of Economics department of University of Dhaka. Another informants from the pressure group was an official, of Centre for Policy Dialogue, a renowned watchdog NGO of Bangladesh.

As the study is exploratory on nature, it employed only 7 qualitative interviews, as within the qualitative research the aim is not genarilisability of the results but to enable the researcher to get ‘close' to participants and develop with them trusting relationships which allowed to penetrate their realities and uncover issues of relevance to understandings the substantive research problems.

3.3.2. Interviews as the Research Tools

In order to meet the study's research objectives, the researcher emphasises on the qualitative research methods of the collection of the data. As, the researcher wants to understand the reform programs from the point of the view of the actors who are directly involved with the process. As a result, the research focuses on insights from a series of qualitative interviews in which officials are seen to construct themselves, as social actors, and their social world through their discoveries.

As a research tool, interview is being widely used for its great flexibility and as it can suit in a variety of research situations. Depending on the research questions and assumptions the researcher should chose what particular interview method and techniques he/she is going to chose. The area of investigation and subsequently analysis can greatly vary under different interview methods. Choosing the particular interview method depends on the purpose of gathering data. At one end, interviews are very much standardized where interviews asked a standardized and planned questions, interviewer does not want to go too in-depth and use a pre-coded categories. Where as, on the other end interviews are unstructured and unopen ended, where interviews are not preplanned and standardized, the interviewer asked questions depending up on the directions the interview takes.

For the purpose of this research the semistructured interview method was seen to be appropriate. There was no particular question but rather a try to identify the topic areas the interview could cover. Flick, U. (1998) suggested that semi structure interview reconstruct subjective theories. By subjective theory the writer means the interviewee has a complex stock of knowledge of the topic. This knowledge includes assumptions that are explicit and immediate and which he or she can express spontaneously in asking an open question.

3.3.3. Procedures and Administration

Interviews were all conducted in Bangladesh. The average lengths of the interviews are 30-40 minutes. The researcher had to conduct the interviews with the senior government officials, because of the time constraints, personal contacts were used to arrange the interviews. Going through the appropriate channel might cause bureaucratic delays. Appointments were made to conduct the interviews with the IMF and the World Bank officials. The interviews were taken in the interviewees' own office.

According to Punch (1998) “it is important that when approaching the people for data collection, the researcher needs to ensure the approach is both ethical and professional”. As a result before the interviews the researcher ensured all the ethical considerations were taken into consideration. The researcher ensured the informant had the full consent to give the interview and could end the interview whenever he/she wants. The researcher took the full responsibility to maintain the anonymity of the interviewee and debriefed after the data collection about the full aims of the study.

Throughout the interview the researcher made initiative to invite the respondents to elaborate their views. Informants were encouraged to share their experience and examples of specific issues.

4. Analysis of Findings

Reform is a must for the developing countries not only to develop the country but also has to fulfil conditions to get the loan from the IMF and the World Bank as well as the other donor countries. But the intention and the effectiveness of the prescribed reform program has been questioned over the years by many critics. Although the IMF and the World Bank stick to their prescribed reform programs and claim it as a success. In this context the main aim of this study is to evaluate the effectiveness of the IMF and the World Bank prescribed reform programs. If its not working properly then the study will try to find out the causes for the failure. The researcher chose one of the developing country of the Third World Bangladesh for the study. As mentioned in the methodology chapter, the researcher conducted in depth interview with the officials who are directly involved with the process and also the officials of the pressure groups which constantly monitoring the process.

Interviews aimed to find out the officials concept about the reform, how they are implementing it, their evaluation of the success/failure of the reform, what are the constraints and what could be done to make it more effective. After the interviews were conducted, transcripts were carried out to enable the researcher to contextualise the information collected during the interviews. According to Strauss, A. and Corbin, J. (1998) “the grounded theory was derived from data, systematically gathered and analysed through the research process”. As a result the study should be seen as the first stage within the grounded theory and as such data analysis has been carried out after collection and transcriptions of interviews.

Data analysis carried out based on procedures the grounded theory approach (Strauss, A. and Corbin, J. 1998; Flick, U. 1998). The transcripts were used to derive open codes so as to be able to capture the detail of the text axial codes into more general categories and what analysis has illustrated is the emergence of particular themes or codes evident in informant's talk. This section aims at carrying out an analysis largely driven and structured around informant's talks, and the following chapter aims at discussing and the themes that emerged with reference and reflection of established literature.

The IMF and the World Bank prescribed the reform and the condionalities as the prerequisites for sanctioning the loan or sometimes for rescheduling it in the developing countries. If the country fails to implement the reform program the IMF and the World Bank cut down the amount of the loan and put pressure on the government to implement it and constantly monitor the progress. Now the aims and objectives of these reforms are to guide the country on the path of the development, to ensure the loan repayment and to ensure the country achieve enough sustainability so that they don't have to depend on the loan in the future. The successful reform programs depend on the government, whether they implement it properly and also how well the reforms the IMF and the World Bank formulate.

To start the interview the researcher tries to find out the concept of the reform from the interviewees perspective. All the interviewees agreed to get the loans from the IMF and the World Bank the country have to implement the reform as the prerequisite. They also agreed that the need for implementing the reform was not for the loan but also for the development. But the question arise here how far have the reforms been implemented. Two of the informants viewed the issue by saying -

“since when the Bangladesh start getting the foreign loans the donors are prescribing the reforms as the pre conditions, but we have to find out what percentage of those reforms are actually implemented. Most of the time the way those were implemented is some kind of white wash” (Interviewee 6).

“the reforms are absolute necessary for a developing country like Bangladesh to achieve the development. But the reforms are not implementing in Bangladesh properly” (Interviewee 2).

In order to explore further the focus then shifted towards the way it is being implemented. The government officials were all claiming that they were trying to implement the reform as it was prescribed in the Poverty Reduction Strategy Papers for Bangladesh. One of the official (Interviewee 1) showed the researcher the agenda of the meeting for the reform programs for the year 2006, and he informed the researcher that the IMF and the World Bank were happy with the way the government was implementing the reform programs. But while talking with the official from the World Bank the interviewee (Interviewee 4) said -

“the World Bank is not happy with the slow pace of the reform”.

While talking with another interviewee (Interviewee 7) the informant informed the researcher that the government failed to implement the reform. According to him -

“because of the slow pace of the government's reform program the IMF and the World Bank withdrew a huge amount of loan which was promised before. The amount of the loan which we have been receiving for the last five years is decreasing but it is not because we are developing, it is reducing because of our failure to implement the reform programs”.

It was found from the statements that although the government officials claim that the reforms are implemented properly but in the reality the scenario is totally different.

Now the researcher try to focus on to find out in what basis the reforms are formulated. The government officials noted in their interviews that the reforms were based on the PRSP, which is formulated in collaboration with the IMF and the World Bank.

To discuss the reform process further the researcher wanted to focus on how the conditionalities of the reform were made, who are making it, who are deciding the conditionalities for the loan of a particular project of the World Bank and the IMF. All the government officials informed the researcher that the World Bank and the IMF jointly make the reform programs. According to one of the interviewee (Interviewee 1) -

“in the meeting the officials from the World Bank and the IMF suggested the reform programs for the government to implement it. For the various development project the government placed in front of the IMF and the World Bank, and if the project approved by them then they put the conditionalities for the loan”.

Now the interviewee of the World Bank (Interviewee 4) said that -

“we want to ensure that the loan is be utilised properly and that's why place the conditionalities”.

Therefore, it can be found from statements that the government has the less power or no power to formulate or put forward their own reform or conditionalities for the loan. When the conditionalites are formulates it should consider whether the country has the ability to implement the conditionalities of reform or not. The effectiveness and the success of the reform depend on that. The government officials in the interviews said that they have to get the loans to keep the economy running and that's why its not possible sometimes to evaluate the conditionalites properly. As the interviewee (Interviewee 3) said-

“for all the development works of the government, it is not possible for the government to finance, with the limited budget it has. As a result we have to consider some of the conditionalities that might be impossible to achieve”.

In this context another interviewee (Interviewee 7) commented -

“government's tendency is to get the loan. Whenever the IMF or the World Bank offer a loan or grant with some conditionalities associated with it the government just takes it. The government doesn't consider whether they have the ability to implement the conditionalities or not”.

It can be said from the comments that the government is agreeing to the conditions because of their aid dependency and both the IMF, the World Bank and the government is not considering whether the conditions are achievable or not. as one of the interviewee (Interviewee 2) put it -

“ we know some of the conditions for the reform will not work at all in Bangladesh, its not possible to implement those but still we agree with those conditions”.

In the interviews the researcher also focused on the conditionalities of the structural adjustment programs. The researcher tries to get the insight from the interviewees to find out whether those conditionalities are working in Bangladesh or not. The IMF and the World Bank always emphasizes on a tight budget, liberalization of the Nationalized Commercial Banks, liberalization of the market, cut down on subsidies. As it can be found from the interview -

“Bangladesh freed its market in early 80's, it also introduced the system where the market will decide the exchange rate. The Bangladesh Bank started announcing the monetary policy of the government in every six months so all those concerned get information on what to expect in monetary policy for the next six months”.

As highlighted in the interview the government took more or less initiatives to implement the conditionalites of the structural adjustment programs. But the government of Bangladesh failed to implement some of the most important conditionalities of the structural adjustment program like - cutting down the subsidies, increasing revenue, lower down the inflation rate. In this context one of the interviewee (Interviewee 2) said -

“the World Bank and the IMF was always telling us to increase the revenue. The government should take some initiativse to formulate and implement some policies, which are going to increase the revenue; in the country of 16 million people only 600,000 are paying the taxes”.

Another interview (Interviewee 6) expressed his view about cutting down the subsidies. He gave the researcher the example of government's subsidies for the power sector. According to him -

“government should take the advice of the World Bank and the IMF and cut down the subsidies for the power sector and oil prices. Economy of the country is suffering too much for these subsidies. Government is borrowing heavily from the Bank's to give the subsidies”.

As the government fail to implement the conditionalities this might slow down the whole reform process. Like it happened in the case of liberalizing the Nationalised Commercial Banks. One of the interviewee (Interviewee 4) said in this context -

“government is too slow to privatise the Nationalised Commercial Banks. As a result the government is loosing the possibility of the foreign direct investment in this sector. Also, slow implementation of the reform programs also causes the Bank [World Bank] and the Fund [IMF] to think that government of Bangladesh is not interested in implementing the reforms”.

So it can be said from those findings that there may be some constraints to implement the reform programs. As a result the researcher try to focus to find out what are the constraints for the reform. From the interviews the researcher found out that all the interviewees suggested that the biggest constraints for the reform is the administrative and political weakness of the Government of Bangladesh. As one of the interviewee (Interviewee 7) said in the interview -

“over the years all the governments were more concerned about their popularity; as a result they failed to restructure the whole Revenue Board. Restructuring the whole revenue system could increase the government's revenue earnings and by that reduce the dependency on the foreign loans”.

Another interviewee (Interviewee 6) told the researcher -

“government is giving the subsidies to increase their popularity. It takes the project, which are sometimes unnecessary and not bring any development for the long run. But still government ask for the foreign loans for those projects”.

Government of Bangladesh also failed to identify which sector it should prioritise for the development programs and then ask for the loan for that sector. Instead they focus on just getting on the loan and then become more dependent on the loans. As it can be found from the interview of the government officials -

“government is more concerned about getting the loan in any sector possible without targeting single sector which need more priority. At the end of the day government use the loans to the gap in the budget deficit”.

It was found that the corruption can be another cause for slowing down the reforms. It can be found in the statement of the interviewee (Interviewee 4) -

“the World Bank worked with the zero tolerance of corruption. But in Bangladesh the government in different regimes are doing all kinds of corruption in the name of development programs. The government took the projects and most of the cases the projects are half done and the actual people are not getting any benefits. But the political leaders, bureaucratic administration and the bourgeoisies who are allies for the government are stealing the money. There is no public accountability on how the foreign loan utilised”.

All the government officials whose interviews were taken for this study also admitted the corruption as the constraint for the reform.

The IMF and the World Bank prescribe the reforms and the conditionalities. While formulating the reform both of these ignoring the country's perspective, they are not considering the country's ability whether it could implement the reform or not, they are also ignoring whether that conditionalities or the reform is necessary for the country. One of the interviewee (Interviewee 6) mentioned in the interview -

“the IMF and the World Bank suggests their own reform which are donor driven not people driven. In the end of the day it serves their interest”.

The official of the World Bank whose interview was taken for this study also admitted it. According to the interviewee (Interviewee 4) -

“at the end of the day you have to consider that the World Bank is more a Bank rather than some kind of development organization. It has to do business and has to get the fund from its various allies in order to do the business. As a result it formulate the reform program which serves its business interest and also its allies”.

The reforms in a sense were made to serve the interest of the World Bank and the IMF itself and they are not considering the country's perspective that much. They monitored the reform programs, put pressure on the country to implement it. But even if the reform are not fulfilled all the conditions for what it made, they advertise such a way that reform is successful and government would start getting the benefits of the reform soon.

“the IMF and the World Bank told the government of Bangladesh to reduce the corruption and implemented the reform in the National Revenue Board. The government of Bangladesh formed the Anti-Corruption Bureau and appointed an Ombudsman for the National Revenue Board. World Bank and IMF took the success as their own and advertise it everywhere. But the actual purpose for which the government formed the Anti-Corruption Bureau and appointed the Ombudsman actually failed. The Bureau itself became the centre of the corruption itself and the Ombudsman designation which is created recently would follow the same path soon” (Interviewee 7).

The official of the World Bank (Interviewee 4) also mentioned it-

“we have to do the business and disburse the loan. If we put more pressure, and ask for more accountability, the government will stop asking for the loan”.

Same kind of statements were given by the government officials -

“the government and the Bank [World Bank] and Fund's [IMF] knows that the reform will not be implement properly. The government implement only as much as reform required to get the loan in the future”.

One of the potential interviewee for the research was an official of the IMF. The researcher tried to make an appointment with the official for the interview but he refused to give any kind of interview unless he got the permission from the IMF's head office in Washington. Although the official was reluctant to allow any interviews but talking with him for few minutes the researcher got some valuable information. He said that -

“they send all the information of the country to Washington head office and then the officials in there formulate the reform policy for the country”.

Such kind of policies raise the question whether the officials who are formulating the reform program for a country from the Washington knows the real picture of the country, whether they are getting enough information, do they consider country's dilemma while formulating the policies.

After finding out the constraints the researcher focus on how to make the reform successful to achieve the goal. All the interviewees more or less agreed the prescribed reforms by the IMF and the World Bank is not at all bad, if it is implemented properly, it could bring the development for the country. But it needs the commitment from the government. As one of the interviewee (Interviewee 7) said -

“the World Bank and the IMF are pressurizing the government to reduce the corruption and raise the revenue. But it is the government who needs to committed enough to implement those”.

The government officials also expressed the same view -

“the government has to prioritise particular sectors where there is need for development like the power sector and then ask for assistance. But the government has to consider also that instead of just achieving the short term goal they have to consider the long term development” (Interviewee 3 ).

The official from the World Bank said in this context to the researcher -

“ you have to consider the fact that IMF and World Bank are not the reform implementing agency, they are just suggesting the reform. But the government itself is the implementing agency and it has to be committed enough to implement the reform for it's own shake”.

So for the reform, it is a necessity that the government has the commitment to implement the reform.

The interviewees agreed that the reforms have to come from the government. The IMF and the World Bank should give more freedom to the government to formulate their own reform policy. One of the interviewee (Interviewee 6) gave the researcher an example where the government got enough freedom to implement its own decision. According to him -

“for a long time IMF and World Bank place pressure on the Bangladesh government to increase the oil price as the price increased in the world market. But the government could not increase the price because they would be highly criticised for following IMF and World Bank's decision and increasing the price. Although government did acknowledge that need to increase price. Finance and Planning Minister of Bangladesh then invited the renowned economists, political leaders of the oppositions, and the business class in a meeting where they discussed the situation. Everyone agreed the oil price should be increased. They made the statement that the increase of the price was necessary and the entire population understood the situation and there was no protest against the increased price”.

The government discussed with different classes of the society to formulate any reform program that is a possibility and could become more effective. Another interviewee (Interviewee 7) said -

“in last five years dependency on the foreign loans decreased, as a result the government got more negotiating power before committing to any IMF and World Bank prescribed reform. They can now discuss and if necessary totally disagree to commit to any reform which they think impossible to achieve”.

Therefore it can be said that although the reforms has constraints, they can be overcome and if the government committed enough then the reform can be successful in Bangladesh.

5. Discussion

It can be found from the interviews of the interviewees that Bangladesh debt is not that much of a problem but the country has an enormous dependence on foreign loans. Along with the foreign loans, the reform and conditionalities are also attached. The IMF and the World Bank pressurize Bangladesh to implement to reforms, which can lead the country towards the development. But in the interviews the researcher found that reform is not going on in the right direction like the way it did not work in many other developing countries in Latin America and Sub Saharan countries.

5.1. Reform and Bangladesh

It can be found from the interviews that reform is not likely to take place the way it should in Bangladesh. The slow pace of the reform in many issues caused withdrawing of the proposed loan by the IMF and the World Bank. In last five years both of these organisations have been giving less and less to Bangladesh. It was also found out that the government has the tendency of being much too dependent on the foreign loans. According to Sobhan, R. (1996) “it would appear that neither the passing of time nor the change of regimes has contributed to reducing the burden of dependence on loans. Over the years loan has become an integral prop of the older order militating any pressure to generate resources or mobilise the masses of collective effort”. For this dependency the government agreed to any kind of reform or conditionalities imposed by the IMF and the World Bank. Although in real context the government just implement as reform require so that they could get the future loan. This kind of syndrome of Bangladesh government could be found in the other developing countries also. According to Soederberg, S. (2005), “being creditworthy is a key to success for developing countries since this makes it possible for them to borrow larger amount in future”. Now the creditworthiness of a country not only depend on the timely repayment of loan but also showing the reform is going on in the country according to the IMF and the World Bank's prescribed direction. Sobhan, R. (1982) regarded the reform process of Bangladesh as, “in most cases the development outcomes from the reforms tended to be far below expectation and even where the results were positive, the improvement in the performance of the economy were not always sustainable”.

It was also found in the interviews that the reform of Bangladesh is not people driven but rather donor driven. As a result, the reforms have been formulated the way the donors in this case the IMF and the World Bank want. While formulating the reform they do not consider the country's perspective and sometimes those policies even not possible to achieve also. Akash, M. M. (1998) in this context said “the donor agency officials anxious to convince their bureaucratic master that they (a) committed to a large loan and (b) have persuaded the host government to accept all the conditions deemed to appropriate the success of the project or the program. This psychology has lead to a compact between both donor and recipient government to contract conditions which both known to be unimplemented”. Rashid, M. A. and Rahman, M. (1998) regarding the IMF and the World Bank's prescribed reform said “as is well known and documented, this very same prescription has been handed down by the World Bank and the IMF to various other countries in Asia, Africa, Latin America irrespective of their differences in political systems, economic structures, quality of governance and supportive non government institutions”.

5.2. Constraints of Reform

In order to find out why the reform is not working in Bangladesh in the interviews an attempt was made to find out the constraints of the reform. The interviewees made it clear that corruption is one of the main constraints for reform. Over the years in different regimes governments only focus on the short term gain from the foreign loans. They took on projects to get the fund and most of the cases the funds were not utilised and did not implement any reform which were attached to the loan. Sobhan, R (1982) viewed the corruption as “both in terms of intra-bureaucratic power and within the polity, control over projects becomes a major resource for those contending for state power”. Further in his later research Sobhan, R. (1996) found out that the same kind of corruption of government slowed down the reform process in Tanzania. It can be found that in the other developing countries, corruption became the constraints for the reform, like in Latin America (cited at. George, S. 1988) or Sub Saharan Africa (cited at. Africa Research Bulletin, 2004).

It was found from the interviewees that political and administrative weaknesses of the Bangladesh government also cause the slow pace of the reform. In order to gain instant popularity the government failed to implement the reform, which in the long run can achieve development. The leaders were looking for opportunities to transfer the economic cost of the reforms to the donors in order to pay the political cost of reforms at the polling booth (Bhattacharya, D. 1998). In order to impress the government, the public officials also help the government to gain access to more aid rather than helping them to implement reform. According to Sobhan. R. (1996) “public officials thus found it more profitable to invest their time in negotiating aid, rather than in mobilising resources. Public officials earned more credit in negotiating new projects rather than in successfully bringing such projects into fruitations”. The interviewees viewed that the government failed to identify the projects, which should be, prioritise for the development of the country.

The interviewees mentioned that the reforms are formulated by the IMF and the World Bank, who do not consider in most of the cases, a country's conditions, whether the country has the ability to implement the reform or not, or whether such kind of conditionalities are suitable for the country or not. Sobhan, R. (1998) viewed that, “ in Bangladesh the IMF and the World Bank tended to freely express their views on the suitability of various policies enacted by the government of the day, the quality of the administration and the integrity of the political leadership. This attitude originates in the belief that the size and importance of their right to dictate how it should conduct it's development affairs”. As it can be found from the previous chapter in the literature review of this study such kind of reforms backfired in many countries. For example, IMF and the World Bank prescribed for liberalization of the economy but Chang, H. (2003) in his research find out that, “the growth slow down has been more dramatic in the developing regions where more drastic liberalization programs were implemented under the IMF and World Bank tutelage”. The IMF and the World Bank prescribed the structural programs for Bangladesh, now that also failed in various countries for example, Larrea, L. and North, L. L. (1997) in their research find out that structural adjustment was a total failure to bring the development in Ecuador rather it make the situation worse, as they viewed “following the implementation of stabilisation and structural adjustment programs, growth and development suffer marked deterioration. In 1997 per capita GDP hovered around its 1981 level… worsening poverty resulted from increased unemployment and underemployment and from decreased incomes”.

5.3. Making the reform successful

It was also found from the interviewees that although the IMF and the World Bank's prescribed reform are in many context not suitable for Bangladesh but many of the conditionalities of reform could lead Bangladesh on to the path of development. The World Bank and the IMF are prescribing sollutions for reducing the corruption, developing the strong Revenue Board or privatising the Nationalised Commercial Banks. It also found from the interviews that it requires government's strong commitment to implement the reform process. Sen, B. (1998) in this context said that, “its up to the Government of Bangladesh to take command of own development philosophy, locating it within holistic programs, to instrumentalise their goals and then design projects which can reflect these program priorities”.

It can be found, that the success of the South East Asian countries also known as ‘Tiger Economy' development those countries' governments were committed enough to take the reform program and as a result they become successful. Larrena, C. and North, L. L. (1998) viewed that, “those countries also benefited from sustain and generous international assistance but the governments countries were committed enough to carry out agrarian and other redistributive reforms, expand access to education and basic health services, and developed strong institutions thus achieve the development”.

The interviewees also revealed that being totally committed is not enough, Bangladesh should have enough freedom to formulate and implement it's own reforms, rather than depend on the IMF and the World Bank for prescribed reform. Stigltz, J. (2006) suggested that, “IMF and World Bank must ensure that a country should be able to implement and formulate its own reform rather than undermining the reform by parallel donor run administration”. Akash, M. M. (1998) in this context said that, “if the reform is conceived and imposed by an external force, say IMF and the World Bank [aid donors], then the degree of the commitment and the quality of support at home is likely to be weak. On the other hand, a domestically owned vision generally reflects a higher degree of commitment through a more realistic concretisation of the vision”.

6. Conclusion and Reflections

Foreign loans are an integral part for the development programs in the developing countries. Investing the loan in the profitable projects those countries supposed to attain the sustainability. The sustainability here means that they do not have to rely on the foreign loans anymore, able to reduce the gap in the balance of payments, generate enough income for the population to reduce the poverty, although in reality the loans are utilising for financing current consumption. Therefore, the reasons for which the loans are not achieving rather it create addiction for more loans (Sobhan, R. 1998). Donors are attaching the conditionalies to ensure proper utilisation of the loan and prescribing the reform programs for developing countries.

In this study, the researcher focused on the IMF and the World Bank's approved reform programs. IMF and the World Bank's prescribed reform programs are very important for a developing country because implementation of those not only ensure the future loans, but also other donor countries and the financial institutes consider that as a parameter for the creditworthiness. The successful implementation of the reform process led to sustainability for many countries like - Mexico, Brazil, Argentina, Indonesia, etc. But the reform programs are also highly controversial, and many critics criticised in various issues. Critics like Akash, M. M. (1998), George, S. (1988) expressed that - through the reform programs the IMF and the World Bank are looking after the interest of developed countries rather than looking after the interest of developing countries. Many of the conditionalites of the IMF and the World Bank's much hyped structural adjustment programs were also found as not suitable for developing countries. Radet ad Sachs, 1998; Feldstein, 1998 (cited at, Bird, G. and Milne, A., 1999) blamed the structural adjustment programs for the crisis of the South East Asia in the early 90's.

In the study I try to find out the effectiveness of the World Bank and the IMF's prescribed reform programs in a particular developing country, Bangladesh. Like many other developing countries Bangladesh is also highly depended on the foreign loan. The researcher conducted a semi structure interviews of the officials who are directly involved with the process. The interviewees gave an insight of the programs and revealed that in Bangladesh government does not implement the reform programs properly. As a result, the country failed to achieve the goals of the reform programs. the researcher also identified the corruption as one of the main constraints of the reform programs.

Stigltz, J. (2006) identifies that, “development can not be imposed rather it should be facilitated”, where as the IMF and the World Bank through their reform program trying to impose the development in developing countries. Bangladesh is not formulating it's own reform rather it is rely on the IMF and the World Bank's imposed reform program and this study identified that as the constraints also.

The findings of the study also exposed that in many cases Bangladesh needed some of the conditionalities and reforms, which prescribed by the World Bank and the IMF. If the government make full commitment to implement those then it could bring some real change in the Bangladesh context. For example, the IMF and the World Bank prescribe for the liberalizing of the Nationalised Commercial Banks. Bangladesh slowly started to liberalize it's Nationalised Bank's. Few days back government sold the shares of one of the Bank to foreign investor, in that way the government could be able to attract the foreign direct investments and generate revenue.

Thereby the researcher came to a conclusion - if the government of Bangladesh able to formulate their own reform program monitored by the IMF and the World Bank then they are going to be more committed to implement it. But before that they also have to reduce the corruption otherwise that could be the obstacle for the reform programs.

In this research the researcher did not take the interviews of the political leaders from both the government and the opposition parties. They are the actually making the law and put pressure on the IMF and the World Bank in various issues of the reform. It would be more informative to find out the insights from them. The research can be done in the future where the researcher is going to conduct the interviews with the political leaders and can find out their viewpoints.

The research was conducted in Bangladesh and findings are based on the Bangladesh context. Same kind of research could be done in other developing countries also and a comparison can be drawn in the future.

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