The World Bank and Western governments have used various techniques to create the appearance of a fiscally sound institution. During the debt crisis of the 1980s, for example, borrowing countries paid their old debts through more borrowing from the World Bank. That practice of “round‐tripping” money helped bail out many private‐sector creditors but worsened the bank’s financial position. Loans from rich countries’ bilateral aid agencies and from the International Development Association (the World Bank’s concessionary loan window) also have helped to keep the World Bank afloat. Even though the bank is now being paid back more than it lends, its meager loan‐loss provisions and confidential notes suggest that there is ample reason for concern.
Bank reform will not solve the institution’s problems. It must be shut down. There are at least five ways to do that: dissolution according to the bank’s articles of agreement; privatization; selling its assets; swapping bank debts for equity; and unilateral withdrawal by individual countries. Closing the World Bank now would be less damaging than waiting for its collapse.
