The World Bank’s aid for the world’s poorest countries is under attack. Reg Rumney reports
The International Development Association (IDA), the arm of the World Bank which provides almost free loans to the poorest countries in the world, could be in trouble.
The IDA provides concessional loans — typically 40 years repayment, no interest, and no payment required for the first 10 years.
Representatives of 34 member states of the IDA were due to meet in Pretoria this Thursday and Friday to discuss, among other things, filling the pot of money from which IDA loans are made.
Commitments to the IDA fund by donor countries for the present three-year period, which began in July 1993, now stand at $18-billion. A final decision on the size of the “replenishment” of IDA 10, as the present period is known, will be made at the end of the year. IDA 11 starts in July next year. However, there is some doubt the United States will chip in the entire amount it has committed to IDA 10.
The US Senate has proposed the US contribution to the IDA be cut by half. World Bank president James Wolfensohn has warned this could encourage other donor countries to scale down aid. Wolfensohn, in Johannesburg last week at the end of a visit to five African countries, also warned that the industrialised world was becoming more inward-looking. However, he was encouraged by the G7 leaders’ pledge in Halifax to honour their IDA 10 commitments.
The World Bank’s Geoffrey Lamb said in Johannesburg this week around $600-million of the US share of $1,3- billion to $1,5-billion was outstanding. Lamb was hopeful the US lawmakers would see the light.
Another perspective was given by US Trade Representative special counsel Howard Reed in an address to the South African Institute of International Affairs at Jan Smuts House in Johannesburg last month. He said: “As for the United States, we are faced with a mounting national debt that is approaching US$5- trillion, annual budget deficits of $150-billion to $200-billion, runaway health care costs, continuing global economic and strategic responsibilities, and a balance-of-payments deficit exceeding $100-billion in eight of the last 10 years.
“Now a restless American electorate is demanding greater fiscal responsibility from the government. We are now in the process of agonising over what and how much to cut.
“One of the principal targets of our Congress over the past few years is US foreign aid expenditures. Quite candidly, pressure to reduce the foreign aid budget will continue — and traditional opposition to cutting foreign aid is likely to weaken not strengthen.”
This week the House of Representatives in Washington cut nearly $3-billion from President Clinton’s foreign aid plans, and House Republicans, overseeing spending laws, were fending off demands from within the party for deeper cuts as they tried to pass a veto-proof aid
The US is by no means the only donor, and not all donors are developed nations. South Africa itself has contributed $14-million to IDA 10. Korea, which was once a recipient of IDA loans, is a donor.
The IDA is important for South Africa. With about $3- billion a year dedicated to Africa, the IDA is a major source of policy advice and support for South Africa’s closest markets.
The World Bank points out: “South Africa’s exports to its neighbours have more than doubled in five years, despite a fall in per capita income in Sub-Saharan Africa over that period. If South Africa is to continue enjoying strong export growth, its neighbouring markets will need reinforcing and opening. This is central to the IDA’s work.”