58071 Financing Package Restores Confidence in VOL9 / N03 MARCH 1990 In this Issue: Articles 2 Financing Package Restores Mexican Economy Confidence in Mexican Economy. How the $2.01 billion package will work. 4 The Graying of the World. Earth's population is getting older, posing problems for developing countries. 7 Q&A with Bllsel Alisbah. The new VP's views regarding Personnel by Richard Kollodge issues. 10 Bela Balassa's Life Philosophy. The eminent economist has spent 22 years as aconsultant to the Bank. 14 Food from Around the World. Hanker for tabbouleh? Try the 0 Buffet. The $2.01 billion financing package Question: How will the Bank's financ 16 New Delhi Bank Notes. An irreverent from the Bank that supports Mexico's ing package help Mexico reduce its debt and readable publication keeps NOO debt-reduction plan includes a $1.26 bil burden? staff entertained. lion loan earmarked for interest support Mr. Qureshi: The financing package 17 TV and the Triplets. Further tales of and $750 million from undisbursed por will provide Mexico with resources Stephen, Andrew and Sonia Phung. tions ofexisting loans to be used in sup which, together with resources provided port ofreducing the principal ofout by the International Monetary Fund, the Departments standing debt. In an interoiew with Export-Import Bank of Japan and the 12 On the Record. Ibrahim Shihata on "World Bank News," the Bank's media Government of Mexico, can be applied to law and the development process. newsletter, Moeen Qureshi, Senior Vice ward the collateralization of new debt 18 Staff Association. How Do You President for Operations, explains how that Mexico will issue in exchange for i'ts Manage a Paradox? the financing package will work and old debt. 19 Around the Bank how it will benefit Mexico's economy. 20 New Staff Members World Bank financing is part of a $7 21 Letters to the Editor billion package that the Mexicans are try 22 Senior Staff Appointments 24 AnswerLine Q uestion: What is special about this operation? Mr. Qureshi: The $1.26 billion inter ing to put together in order to provide credit enhancement for their debt and debt-service reduction plan. That plan in Cover est-support loan can't be compared to cludes two main options that are being traditional Bank loans because it is a provided to Mexico's creditors. AChinese grandmother providing child care is atypical example of the unique operation based on the Bank's re Under the first option, creditors wiH graying of the world. cent initiative to support debt and debt exchange their old Mexican debt at a dis service reduction for countries undertak Photo by Charlotte Conable count for new debt. The principal of the ing strong adjustment programs. The new debt will be almost 35 percent lower loan assists Mexico's debt-reduction plan, which was devised last year, and than the original debt, but it will still provides "credit-enhancement" for the carry a market interest rate of LIBOR interest payments on Mexico's external (London Interbank Offered Rate) plus debt. Credit enhancement refers to in l3/16. creasing the likelihood that a debt, or in Under the second option, creditors terest on a debt, will be repaid. will exchange their old debt for new The $1.26 billion interest-support fixed-rate par bonds. The principal on The Bank's World is published monthly in Washington, D.C., by the Media and loan is in addition to another $750 mil the new debt will be the same as the old Communications Division of the World Bank for lion being provided for debt-reduction debt, but the annual interest rate will be all employees and retirees of the World Bank fixed at 6.25 percent, significantly lower Group, 1818 H St., N.W., Room E-8045, purposes that have been "set aside" out Washington, D.C. 20433. of six other loans that the Bank pre than the nominal interest rate on the old Thierry Sagnier, Editor viously approved for the country. debt. Jill Roessner, Associate Editor Morallina Fanwar-George, Editorial This is the first Bank loan aimed en Banks that do not want to participate Assistant tirely at interest support leading to debt in these exchanges are offered a set of op Bill Fraser, Designer service reduction. tions to provide new money to Mexico. Question: Once the debt-reduction plan is carried out, will Mexico become less dependent on external financing? Mr. Qureshi: The total gap in Mexico's financial requirements is very large. We have estimated that Mexico's total gross financing needs will be about $50 billion for the next six years. This level of financ ing is required to accommodate an an nual average growth rate of about 4 per cent, assuming that Mexico continues to implement effective adjustment policies. Mexico's population growth rate is about 2.2 percent a year, so a 4 percent eco nomic growth rate is needed to bring about a steady improvement in the stan dard of living. The World Bank's financing package and the agreement with Mexico's credi tors will make it likely that the $50 bil lion goal will be reached. In addition to the $2 billion a year that the World Bank plans to provide Mexico during the next few years, funds from other international and bilateral sources are likely to be available to the country. Direct, private foreign investment will also play an im Question: So the financing package Question: How much debt reduction portant role in Mexico's economic recov enables Mexico to alleviate its debt bur will take place? ery. den in a variety of ways? Mr. Qureshi: Mexico's overall debt-re So, the debt-reduction program, Mr. Qureshi: The objective is to take duction plan is likely to reduce Mexico's which the World Bank has helped com into account the diversity of interests debt service by about $3 billion a year. plete with its financing package, is an es among creditors and to try to present Mexico's outstanding debt exceeds $100 sential element in closing Mexico's over them with options that are attractive in billion. The overall debt-reduction plan all financial gap. II relation to their portfolios and their fi covers more than $48 billion, or nearly nancial objectives and policies. one-half of the total debt, and most of Editor's note: Richard Kollodge is Associ Some creditors, for example, may find the long- and medium-term debt due to ate Editor of World Bank News. it more desirable to take a discount on commercial banks. the principal of the old debt and there fore reduce the face value of their securi ties in exchange for new debt, which will First Loans to Poland be collateralized. Others may prefer to Two Bank loans totaling $360 million mark the first time Poland has borrowed maintain the face value of their debt, but from the Bank. The projects play an important role in Poland's economic reform accept a lower interest rate. In either program, which will make the economy more market-oriented, efficient and pro case, the new debt would be enhanced by ductive, leading to growth and better living conditions. the $7 billion package that I just men The first loan, $260 million, supports a project to help improve Poland's convert tioned. The package would provide secu ible-currency trade balance by raising the volume, quality and value-added of indus rity for the repayment of the principal trial exports. through zero-coupon bonds issued by The second loan, $100 million, is supporting a project to assist the country's ef the u.S. and some other governments. forts to rehabilitate, modernize and expand agricultural processing industries. Or, it would be used to provide a security In a statement announcing the loans on February 6, Bank President Barber Con of up to 18 months' worth of interest able said: "The Bank is working with Poland on a lending program which could payments through funds in escrow ac reach $2.5 billion in new commitments over a three-year period." II counts. THE BANK'S WORLD / MARCH 1990 3 The Graying of the World by Charlotte Conable I n 1980, when a colleague and I organ ized international workshops on the elderly at a United Nations conference in Copenhagen, few people from developing countries were willing to participate. 'We have no problems with older people," they said. They reported that the number of el derly in their countries was small, and that those people were adequately cared for by their families. Five years later, at a similar confer ence in Nairobi, participants-the major ity from developing nations-over whelmed the capacity of our meeting rooms. They crowded in, concerned and eager to talk about aging. This rapidly escalating interest in older people reflects one of the most re markable and little noticed demographic changes now occurring worldwide: the accelerating increase in the numbers of elderly as a significant portion of the global population. No boundaries The graying of the population knows no geographical boundaries. According to the American Association for Interna tional Aging, the world's population is ex pected to increase 2-112 times between 1960 and 2020 (from 3 billion to 7.8 bil lion). But the number of persons 60 or older is expected to increase more than This older Moroccan woman operates a farm to support her family, four times in this same period (from 234 Photos by Charlotte Conable million to almost 1 billion), with those 80 and older comprising the fastest grow ing segment of the elderly population. Most relevant to those concerned with development is the expected increase in the rise in absolute numbers of elderly dard cut-off age for female fecundity, a the total population, as well as the 60 that gives them considerable importance physiological change that can occur at plus population, from developed to devel as a population meriting attention. even younger ages. However one chooses oping countries. Forecasters predict that But how old is old? In Japan, life ex to demarcate the elderly, it can be as the percentage of the world's population pectancy is 77 years, the highest in the sumed that their numbers in many devel in developing countries will soar from world. In Bangladesh and some Sub oping countries may be much greater 69 percent in 1960 to 82 percent in Saharan African countries, life expec than currently recognized by Western 2020, with the percentage of the 60-plus tancy is less than 50 years. The U.N. has standards. population jumping dramatically from selected 60 years as the chronological de 49 percent to 69 percent. While the pro marcation of age, yet this relates primar Success story portion of older people in the developing ily to men's customary retirement from The rapid increase in numbers of world is expected to increase from 6 to work. In contrast, women in many socie older people in the developing world has 10 percent of the total population, it is ties are considered old at 50, the stan- been described as "a public health suc 4 THE BANK'S WORLD I MARCH 1990 cess story." Aging on a mas to design and implement the most effec sive scale has been brought tive programs. about in this century, accord Older people are frequently viewed ing to the U.N., by several fac negatively as dependent, in declining tors, including the reduction health, a drain on scarce resources. in many parts of the world of Some, particularly at advanced ages, are numerous infectious dis in need of economic, social and physical eases and perinata ~ and in assistance. But it belies reality to stereo fant mortality, and improve type all elderly in this manner. Many are ments in nutrition and physically and mentally able to contrib health care .. ute to the economic, social and cultural Between 1960 and 2025, life of the community. Some now per life expectancy in developed form necessary tasks, such as the grand nations is expected to in mothers who provide child care, en crease by only eight years. abling mothers to work outside the Developing countries in East home, and others supplying health care and South Asia, Mrica and services in rural areas. While the needs Latin America, on the other of the frail elderly must be met, opportu hand, will experience in nities must also be created to integrate creases of 29,24,23 and 16 the healthy elderly as a productive force years, respectively, between in the community. In India, a traditional birth attendant well into her 80s. 1960 and 2020. Gender is an important differential Furthermore, the aging of among older people. Women tend to live populations is occurring much faster in longer than men and, in many countries, developing nations than anywhere else. Older women are more It has been said that developed countries older females outnumber older males. have made the transition to an aging so Further, men tend to marry women likely than older men ciety in a century, while the developing younger than themselves and so remain married most of their lives. They are also to be in precarious countries are making this transition in three decades. more likely than women to remarry upon the death of a spouse, so that a situations since they The graying of the world's popula large portion of the elderly population tion has economic and social implica are alone, deprived of tions, particularly for development pol consists of widows who may find them icy-makers and planners who must selves deprived of the family income and economic resources ... understand its composition if they are access to the land that previously pro vided economic support. Older women are more likely than older men to be in precarious situations since they are A street vendor in Guatemala. alone, deprived of economic resources and social supports. Family supports dwindle Traditionally, families provided care for their elderly, but industrialization and urbanization are eroding this source of support. Attitudinal surveys in a num ber of countries show that provision of care for the elderly is no longer assumed by many offspring to be an automatic re sponsibility, especially if they have moved away from the parental home. Consequently, the elderly population is not only growing in numbers, but more of this group is at risk as societies mod ernize, historic roles disappear, and tradi tional family supports dwindle. As early as 1973, the United Nations recognized the growth of the world's el derly population and declared aging "one of the crucial social policy questions of the latter third of the 20th century." THE BANK'S WORLD / MARCH 1990 5 At the same it is for some needs to be met COIlce:otllallze economic and social pro ......... -.-'vF''''h countries can to a a orienta Dv",riy""",,, and services can be de- of all ages. FlD,nn'''D IntlernlatIlOmll. a net in 18 mdlepE~nC1ent A .. r~"nl'7:',>tU\ln" An old Brazilian woman lives alone and tends her manioc crop. In .. To encourage data collec promotes the research on issues. The American Association to tion and increased research and 1I UJ,IUll1'; for International a volun World on relevant to the uct of this international deliberation in- onlarllZ2ltlCm involved in work on a In both and non-gov range of domestic and international is ernmental was the sues, strives to advance in International Plan of Action on formation and resources between the which became a to assist United States and countries. The Association """'''DnT", U'UUll;)l1'-Ui nations in for the of lUt'ea(IV born the made in the IPAA: .. To find innovative ways to both the young and old in nation's labor rather than retire ment upon older workers to make way economic for younger ones. de\lelcIPIT1enlt, and all the other nYDCelYHi' the voices I heard years ago in health care that concerns well known to us. Govern Nairobi were determined and ~W'" ,~,,,,,,,tI> care rather than dis- ments' choices are based on "v~" .... r.~ for care limited national resources. memb,ers. and es A Korean often to children and "For us, there is no tomorrow. There is tablish a proper balance between are seen as the nation's " institutions and families as a source of who are A young woman from the Netherlands the live in their own past. all accounts, "I'm interested because this is my as and to coordi an issue that future." IlV~'Jll "I". programs wi th COinITmTuty distant services. immediate action. And a "You .. To encourage r