Kerala to approach World Bank for Rs 3,000 crore loan

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The Kerala government is planning to approach the World Bank to raise around Rs 3,000 crore to aid reconstruction of public infrastructure damaged by the recent floods, according to a Mint report. Chief Minister Pinarayi Vijayan said discussions will begin shortly after the financial cost of the damage is assessed.

The worst floods to hit Kerala in a century has claimed 384 lives, displacing millions, rendering homes uninhabitable and causing irreparable damage to infrastructure. Around 80,000 km of roads and 39 bridges were damaged in the floods. The reconstruction of public utilities is estimated to set the state exchequer back by Rs 20,000 crore.

Reports of taking on debt from multilateral agencies like the World Bank come at a time when the Centre has refused foreign aid. The Centre has maintained that the challenge of rebuilding flood hit Kerala will be met domestically. It has sanctioned aid of only Rs 600 crore as opposed to Kerala’s demand of Rs 2,000 crore.

However, sources told the news daily that the Centre will not object to Kerala taking on debt from the World Bank. In a meeting with Kerala Governor P Sathasivam on Sunday, Prime Minister Narendra Modi clarified that the Rs 600 crore released by the Centre was only a preliminary offer of assistance and that additional funds will be disbursed in the future. He added that supplementary funds will be released from the National Disaster Response Fund.

The federal structure of the country gives individual states the right to take up international loans. If Kerala were to approach the IMF, it would not be without precedent. In the aftermath of the 2005 tsunami, Tamil Nadu sought a $100 million loan from the Asian Development Bank (ADB), World Bank and the United Nations Development Programme (UNDP).

Kerala, which has long maintained strong ties with foreign countries through its diaspora, has received offers of aid from different quarters. On August 22, Shashi Tharoor, who represents Thiruvananthapuram in the Lok Sabha, sounded out officials from the World Health Organisation (WHO), the UN Office for the Coordination of Humanitarian Affairs (OCHA) and the International Red Cross over funding.

If Kerala were to approach multilateral lenders, it would fly in the face of ethos of the ruling Communist Party of India, which has staunchly opposed the free market policies advocated by institutions like the World Bank.

The appointment of Harvard academic Gita Gopinath, who has previously worked with the IMF and the World Economic Forum, to a state government post drew flak from cadres of Kerala’s CPI. Disenchantment died down soon after Kodiyeri Balakrishnan, the state head of the CPI, put his weight behind the Chief Minister’s appointee.