As described in Chapters 1 and 2, both the world economy and the Bank's diagnosis of its problems had by the beginning of the 1980s changed in ways which made its principal operational instrument - the loan to finance a particular development project - appear inadequate as an approach to the major problems which faced it at the time: unprecedented levels of balanceof-payments deficit and debt service all over the developing world, stagnation in most of Latin America, and long-term decline in sub-Saharan Africa. Projects manifestly provided too small and slow-disbursing a financial flow to deal with the debt and balance-of-payments problems, and the conditions attached to them did not touch those levers of economic control - exchange rates and agricultural prices, interest rates and trade policies - which, at least within the Bank, were widely seen as providing the key to project success and the relief of underdevelopment more generally. 1 By providing quick-disbursing finance linked to understandings concerning the manner in which those levers of control were to be managed, the new instrument of policy-based lending held out the hope of killing two birds with one stone; more generous financial flows and more effective economic policy combined in the same package. The question breaks down into two parts: under what circumstances did the Bank succeed in changing economic policy within recipient countries, and did such changes as were made have the desired effect? Part II of this book is directed at the first of these questions, and Part III at the second.