Demand for World Bank lending

This paper attempts to quantify the relevance of crisis lending in IBRD and IDA lending commitments. It finds that IBRD and IDA lending commitments are positively related to an increase in debt service payments and inversely related to the level of reserves of the borrowing country. These two variables explain a large part of the variation in IBRD and IDA lending commitments - adjustment lending as well as project lending - not only since the Asian crisis, but also during tranquil times over the last two decades. This finding implies that bridging the financing gap has been an important factor affecting developing countries' decision to seek financial help from the Bank. While borrowing for servicing debt during a crisis is consistent with the World Bank's goal of poverty reduction and assisting countries without access to financial markets, such borrowing during tranquil times may conflict with these goals.