A. Review of Related Literature
The following integrated literatures are significant in studying the relationship of the Central Bank and World Bank in the Philippines:
World Bank has been a significant financial institution in the Philippines since it was established in the country decades ago. Until now it remains its significant presence and its close ties with the Philippines’s Central Bank. “Short term Pain and long term gain” this is the motto of the World Bank but what we do not know is that they bring us long term Pain rather than gain.
The World Bank was known for enforcing liberalization in the form of devaluation of peso during Marcos’s regime in 1970. The economy was opened for foreign investments and imports. The country turned assistance to the World Bank and the IMF after acquiring huge trade deficits and mounting external debt. Following the devaluation there became a creation of a joint “Central Bank-IMF commission” to overhaul the debt management policies of the government and installation of an IMF resident officer inside the Philippine Central Bank. Significantly, the “Consultative Group” of “interested nations and agencies” is created under the joint leadership of the IMF and the World Bank. This is to monitor the external position of the economy and coordinate foreign assistance to the government. The World Bank had the primary responsibility for the composition and appropriateness of development programs and project evaluation including development priorities in the country. The powers of the World Bank together with its sister institution the IMF became a tool to manage the external debt of the country. (Bello, Kinley, & Elinson, 1982).
The World Bank tends to penetrate our financial system through giving financial aids to address chronic financial and economic crisis but micro problems arise that affects the development of our country like budget deficit, greater debt burden and high interest rates.
The country is known for its heavy borrowing and a debtor to financial institutions such as the World Bank. As we continue to acquire loan from the World Bank we also continue to avail to their attached conditionality. This means allowing them to make such adjustments in the policies of our country. This means allowing them to cut social services to pay back for the debts and allow multinationals to assume control.
Philippines’ Lending Summary (2008-2011)
Figures from World Bank
Apparently, in the year 2010 the repayment is greater than disbursements but in the start of the year 2011 there are greater disbursements than repayments. Despite of the disbursements and repayments our external debt to the World Bank continues to accumulate every year. This gives authority to the World Bank to be in control the Central Bank, offering more reforms and conditionalities promising to lift the debt burden or simply having gains by manipulating interest rates and portfolio investments.
Total External Debt to IBRD in US million dollars (2008-2011)
Figures from Banko Sentral ng Pilipinas
The World Bank is present in many of the ministries: the reforms in health, education industry agriculture, transportation, the environment, etc are under its jurisdiction. The World Bank continues to pursue development projects in the form of loans granted to our country intermediated by the Central Bank. The World Bank integrated the financial system of the country through the Structural adjustment loans (SAL) and sector adjustment loans (SECAL). This paved the way for the entrenchment of the World Bank in the country and made their p0olicy prescriptions. The Structural adjustment loan comes with conditionalities that will be imposed in favor of the World Bank’s interest. The Structural advancement includes “Short term” macro-economic stabilization which includes implying...
Please join StudyMode to read the full document