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Countries Eligible for World Bank Borrowing:
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South AsiaRegional Context South Asia was the fastest growing developing region in 1999 for the second consecutive year. GDP growth averaged 5.4 percent, up slightly from the previous year. Growth in India, at 6 percent in 1999, continued to lead the region’s performance, spurred by an expanding commitment to a broad range of reforms at the national level and in some key states, as well as rising business confidence. Bangladesh grew at a healthy 5.2 percent in 1999, up from 5.1 percent the previous year. This growth was better than expected; a bumper rice crop and sound macroeconomic management helped to offset the effects of the 1998 floods, weak external markets, falling commodity prices, and surging petroleum bills. Growth slowed in Pakistan, to 3.1 percent; the weak performance reflected political uncertainties and serious balance of payments difficulties as well as weak external markets (the latter also affected Sri Lanka).South Asia’s strong growth is all the more remarkable–and indicative of its potential dynamism–in the face of regional and national political instability. Tensions between Pakistan and India over Kashmir continue to take a toll on lives, command large defense expenditures, and keep G7 sanctions in place following nuclear weapons tests in 1998; a military coup in Pakistan in October 1999 created further uncertainties. Elsewhere in the region, a sharp escalation in the scale of the Sri Lankan civil conflict caused an interruption in renewed mediation efforts; political strikes continue in Bangladesh, costing the economy an estimated $60 million for each day lost; and political instability continues in Nepal. Combined with economic and policy constraints, these upheavals limit the region’s ability to attract the foreign investment critical to growth and poverty reduction. Gross capital market flows to South Asia are just 1 percent of the total to developing countries. The instabilities have also contributed to large public sector deficits, inadequate infrastructure services, and poor quality of public spending. South Asia’s poverty continues to present a profound challenge to the Bank’s mission. The region is home to 40 percent of the world’s poor, with some half a billion people living on less than a dollar a day. Key indicators signal the scope of the challenge: South Asia has the world’s highest adult illiteracy rate (59 percent of women are unable to read or write), a third of the world’s maternal deaths, and malnutrition that affects more than half the region’s children under 5 years of age. Lack of access to health care, major public health threats such as HIV/AIDS and malnutrition (see Figure 4.5), low primary school enrollment rates, environmental degradation, inadequate infrastructure, and social exclusion are among the many obstacles to future growth and poverty reduction. |
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