chapter  2
THE WORLD BANK'S MOVE TO POLICY-BASED LENDING
Pages 36

Unsurprisingly, perhaps, the World Bank has never made unconditional loans. Even when virtually all of its loans were for development projects - that is, discrete chunks of physical investment - these loans carried conditions to which the borrower had to agree; and, more importantly, some of these conditions required policy changes. An obvious and familiar example would be a power station project, for which the Bank might not agree to lend unless the developing country borrower agreed to an overhaul of its electricity tariff. The basic rationale for this was not only that the loan had to be serviced, but also that projects should not be supported when pricing encouraged wasteful consumption. Certainly in the 1950s, if not earlier, the Bank exchanged development finance for this kind of policy reform. But a specific project was also still involved at this time; the required policy change could be interpreted as one designed to facilitate the success of that project; and the extent of the policy change was sectoral or sub-sectoral in scope.