World Bank Gets $34 Billion For Controversial Loan Program

by Emad Mekay

(IPS) WASHINGTON -- The World Bank's soft loan arm, the International Development Association (IDA), will get a funding increase of $34 billion from rich nations over the coming three years, the largest increase in two years, international donors and lenders say.

IDA is the World Bank affiliate that provides assistance to the world's 81 poorest countries, where the vast majority of people live on less than two dollars a day.

About $18 billion of the newly pledged $34 billion will come from new contributions from 40 donor countries, the Bank said. This is a 25 percent increase in overall funding from last year.

"IDA is the lifeline for many of the world's poorest people and this increase in IDA resources represents a major step forward in the international community's efforts to fight poverty and achieve the Millennium Development Goals," said World Bank President James Wolfensohn.

Countries in Sub-Saharan Africa with the world's highest per capita debts will be getting financial backing in the form of grants. Countries with lighter debt burdens will receive so-called "concessional long-term loans," which offer interest-free credits with a maturity period of 40 years and a grace period of 10 years.

Other countries will get a mix of grants and credits.

While this is welcome news to many countries, the new increase would still follow the traditional policy guidelines of the World Bank and the rich nations that dominate its board.

The money will be used in part to foster what industrialized nations call "a better climate in poor countries for private investment," "enterpreneurship" and "domestic private sector growth." These are the same targets that have attracted widespread criticism for the World Bank and its sister institution, the International Monetary Fund (IMF).

Independent development groups and civil society organizations have said that conditions and policy directions from the two Washington-based institutions often serve the interests of the industrial nations and their corporations under the guise of poverty alleviation.

They charge that those policies force poor nations to cater to foreign private investors and allow access to their labor markets and resources at bargain basement prices.

Recent protests against the IMF and the World Bank have accused the institutions of consistently putting the interests of wealthy corporations in the developed world above the interests of the planet's poor majority.

Created after World War II to avert Depression-like economic disasters, the World Bank and the IMF are the world's largest public lenders.

The United States, the largest shareholder in the World Bank, backed the new funding increase but said it was crucial that the World Bank demonstrate that "scarce resources are being put to the most effective use possible."

In a speech Feb. 22, U.S. Treasury Secretary John Snow said he expected the increase to boost trade, private capital flows, remittances, and importantly, sound institutions and policies in developing countries, code terms for a Western-style legal and regulatory environment.

Watchdog groups say they are not surprised to see the new increase being tied to economic liberalization, with most of the impetus coming from the United States, Europe and Japan.

"It was known from the analytical documentation being fed into the negotiations that donors were gearing in this direction," said Aldo Caliari of the Washington-based Center of Concern.

"It's not new that the U.S. ... wants to increase the focus of IDA country programs on trade and investment liberalization, privatization and investment climate reform," he said, adding that "the Europeans also are partners in this endeavor."

The United States also wants the Bank to closely monitor progress on the ground in developing nations.

"Simply put, what gets measured gets done," Snow said. "Without this measurement and analytical diagnosis, it's impossible to replicate successes, make mid-term corrections, or phase out unproductive programs."

The World Bank says it will use "systematic indicators" that will be based on the UN Millennium Development Goals (MDGs) and on countries' own statistical systems to track progress.

The MDGs seek to cut world poverty and hunger in half by 2015; provide universal primary education; reduce child mortality by two-thirds; cut maternal mortality by three-quarters; promote gender equality; and reverse the spread of HIV/AIDS, malaria and other diseases, all by 2015.

Many development agencies complain that this new pledges are not enough to meet those gigantic goals. The World Bank agrees that greater commitments will be needed in the future.

"We are pleased overall by the increases in the quality and volume of assistance IDA will be able to deliver over the next three years, though everyone recognizes that the international community will still need to step up to the levels of development assistance required for the poor countries to grow their way out of poverty," said Geoff Lamb, the Bank's vice president for Concessional Finance and Global Partnerships.

The budget still falls about two billion dollars short of the 30 percent increase that donor nations in the Group of Seven major industrial nations pledged in December during a meeting in Athens.

Actual disbursements could also be less, particularly in the case of the United States, whose increase is about 12 percent.

"This is the (George W. Bush) administration's request to Congress, where dynamics tend not to be friendly to foreign assistance," Caliari said. "This particular year, with all the planned budget cuts, it's expected the pressure to cut down that amount will be larger."