Banking for World's Impoverished People

By , Richard Feinberg and Peter Hakim of the Inter-American Dialogue write regularly on global economics.

ATTENTION at the recent annual meetings of the World Bank and International Monetary Fund (IMF) was riveted on the European currency crisis and, to a lesser extent, the economic transformation of the former Soviet Union. When the discussion turned to the developing nations at all, it focused on stimulating growth through trade liberalization and private capital flows.

Virtually ignored was the World Bank's injunction - affirmed in its 1990 annual World Development Report - that "no task should command a higher priority for the world's policymakers than that of reducing global poverty." As the bank itself has said: The dimensions of world poverty are "shameful" and "staggering" - with more than 1 billion people around the globe surviving on less than $400 per year. Yet it is now widely recognized that the centerpiece of the World Bank-IMF meetings - global growth - is necessary but hardly sufficient to alleviate poverty.

There is no disputing that the main responsibility for confronting poverty falls to each nation, but international agencies can and should vigorously reinforce national efforts.

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In the first instance, they must step up their financing for projects directed to the poor, through support for health and education, small enterprises, community and rural development initiatives, and - when necessary - income transfers to the neediest. The World Bank and other major development lenders should pledge at least one-third of their resources over the next 10 years to the fight against world poverty. The ebbing of the debt crisis makes this possible. Emergency balance-of-payments financing can now be left largely to the IMF.

External support can be a crucial source of funding for antipoverty measures. But the potential contribution of the international agencies far exceeds the capital they can provide.

The World Bank and other donors can condition their support in ways that mobilize additional national funding for anti-poverty measures. Not only can these agencies call for counterpart funding for specific social projects, they can also: (1) make adequate attention to the poor a condition for other, nonpoverty lending; (2) insist on such policy initiatives as tax reform and cutbacks in military expenditures, which can dramatically increase national resources for poverty programs; and (3) provide training and technical assistance to make such programs more effective.

The international agencies play the lead role in setting the global development agenda, establishing norms for confronting problems, and fixing priorities for action. By consistently focusing their own attention on poverty and inequity, these agencies will focus the attention of others. They can do this not only by spending money or imposing conditions on their lending, but also through expanded communication with the world and its leaders.

Better information and analysis is crucial. In contrast to the multitude of international statistics on growth rates, inflation, and trade and financial flows, world data on poverty are sorely deficient. There are no readily available indicators that convey the dimensions of poverty or portray the situation of the poor. Most countries do not gather relevant data on a regular basis.

Given its mandate, resources, and technical skills, the World Bank should take the lead in a joint effort among many agencies to build a worldwide data-collection and analysis system on poverty. The system should be capable of producing annual reports on how every nation is meeting the needs of its poor.

All told, international institutions can contribute most to the struggle against poverty by putting political, as well as financial and intellectual, muscle behind national efforts. It is, after all, the poor who are the least powerful. Economic exclusion is everywhere the handmaiden of political exclusion. The World Bank and other external-aid agencies should lean forcefully against this political imbalance, and they should help to bolster the authority and influence of national policymakers committed to opening new opportunities for the poor. On this score, the World Bank-IMF meetings this month were a missed opportunity. -PATHNAME- /usr/local/etc/httpd/plweb/DBGROUPS/paper/database/tape/92/sep/day30/30182.

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