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IMF AND WORLD BANK: World Bank turns to guarantees

World Bank guarantees are a new way to help crisis-hit countries back into the private capital markets. But the Bank still wants to lend money. James Smalhout reports

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The World Bank has been trying, lately, to return to a place much closer to its roots.

Today it may seem strange, but lending didn't figure as part of the plan when the founders - principally John Maynard Keynes and US assistant secretary of the Treasury, Harry Dexter White - unveiled their brainchild 55 years ago at Bretton Woods.

The idea was for the Bank to use financial guarantees - also known as credit enhancements - for mobilizing private capital in the drive to rebuild after World War II. The Bank did two of those deals in its early days but lending has dominated ever since.

Today, renewed enthusiasm for guarantees is coursing through the Bank's headquarters complex in Washington. The Multilateral Investment Guarantee Agency (Miga) - the World Bank affiliate which provides political risk insurance - just finished its best year ever.