Letting down the poorest nations
Good for Britain, Norway, Sweden, Denmark, Finland, Iceland, Austria, Belgium , Italy, Luxembourg, Saudi Arabia, Spain, Australia, Kuwait, the United Arab Emirates, and the Netherlands.Skip to next paragraph
Subscribe Today to the Monitor
They are contributing an additional $500 million to the International Development Association, the affiliate of the World Bank which provides interest-free loans to about 40 of the poorest countries. They are doing so despite the fact that the United States has scaled back its own contributions and therefore, under the IDA agreement, all the other donors could have, too. The total sum raised now -- $3.1 billion for this fiscal year -- falls short of the original goal but, happily, is more than was expected.
Many donor as well as receiving countries are disappointed that today the United States, which once so vigorously held the banner for multilateral aid, is retrenching. For a number of years the US has not been meeting its commitments to IDA. Now the Reagan administration may request so little for the seventh replenishment of IDA ($750 million a year, according to a Treasury official, as against the $1.08 billion a year pledged for the sixth replenishment) that the fund could be cut back 50 percent in real terms. Contributions are determined on a proportional basis and, if the United States -- which has a 27 percent share -- decides to provide less, all the other donor countries have to follow suit. IDA could thus be severely impaired.
This would be unfortunate -- and paradoxical. Mr. Reagan's Treasury Department only recently gave the World Bank and its operations high marks for efficiency and effectiveness. Indeed we could list a whole caboodle of countries -- from Ecuador to Turkey -- which have benefited from IDA aid and graduated out of the need for soft loans. The system works. This is no time, moreover, to undercut IDA -- just when many poor countries are suffering especially severely from high interest rates, recession, and other economic pressures. And when countries in sub-Saharan Africa, for instance, are finally showing a willingness to alter their policies in line with efficient economic practices favored by the World Bank.
Fortunately, other donors have promised to keep up their help to poor countries even if not through IDA channels. There is even a proposal being bruited to establish a special account alongside IDA in which the United States would not participate. If the US does not participate, of course, it will not have a vote -- or the right to bid on projects. American firms would thus be the losers.
Does Washington really want to abdicate its responsibilities and influence? As these and other issues are taken up by world financial leaders at a meeting in Helsinki next month, it is to be hoped the US has a change of heart -- and will again join the list of those who, despite adverse economic conditions, are fulfilling their aid promises. Helping the developing countries not only is a humanitarian imperative. It makes good economic sense.