US delays, but World Bank funds likely to continue
Toronto — It won't stir much press fuss in Washington, Tokyo, or the capitals of Europe. It will, however, be top-of-the-front-page news for papers in China, India, Bangladesh, and the nations of sub-Sahara Africa - countries with some 2 billion in population.
The news is an expected agreement today, Sept. 8, by some 30 donor nations on continued funding of the International Development Association. The IDA is the arm of the World Bank that makes concessional loans to the world's poorest nations, where per capita income runs below $600 a year.
Washington this summer has seen a string of high-level visitors with IDA on their mind, Indian Prime Minister Indira Gandhi being the most noticeable. They have been urging the United States to be generous in its contributions to this 22-year-old bank affiliate.
But Washington is more worried about budget deficits and social-program cutbacks in the US than about poor farmers in India.
''We do have to recognize, and other nations must recognize,'' Donald Regan, US Treasury secretary, said here, ''that the United States has its limitations.''
The US, he said, can't be the ''defender of the free world . . . and give as much financial aid as people would like.''
The IDA agreement is expected to provide for some $3.3 to $3.5 billion for the fiscal year ending next June 30.
The US has not lived up to its full commitment on funding IDA. The American contribution of $3.24 billion for the so-called sixth replenishment was stretched by Congress over four, rather than three, years. The Reagan administration has asked Congress for $945 million for fiscal 1983. There is some indication that Congress may vote something less - about $750 million - unless the administration pushes hard.
The US will have to provide $1.2 billion for fiscal 1984 to live up to its dollar obligation - though falling behind in timing.
Because the US has been delinquent in its provision of funds, other donor nations were threatening to hold back their contributions proportionately. But on Saturday, almost all of the other donors agreed to give the full third yearly amount irrespective of the US behavior.
There was, according to a World Bank official, ''hard criticism of the United States.''
The new agreement means most of donor governments will have to request their legislatures for special funding for 1984 for IDA. If all goes well, IDA should get about $3.4 billion in fiscal 1984, roughly the same as this year.
Negotiations are to start in November for the next three-year replenishment of IDA, beginning July 1, 1985. The World Bank would like to see the amount go beyond the $12 billion provided for the current replenishment. Because of inflation, the new and seventh replenishment would have to be some $15 billion or $16 billion to match the previous three-year replenishment. The poor countries would like to see it enlarged to some $18 billion.
However, the US says the idea of an increase in real contributions - after removing inflation - has to be reexamined. There are unconfirmed reports the US is thinking of about $12 billion.
As the largest contributor to IDA, the US position is crucial. Mr. Regan says the US has nothing to apologize about over the size of its financial assistance abroad. Many of the poor nations, viewing the relative wealth of the United States, consider it stingy.
What has held up agreement on IDA funds for fiscal 1984 is a desire by West Germany and Britain to see a reduction in their relative contributions. Britain complains it gives far more than France, which has a larger gross national product. Germany wants to switch its payments to marks, instead of its current payments, which are denominated in the more costly special drawing rights (an international money).
World Bank officials express confidence this will be worked out by today.
The proposal for fiscal 1984 also involves a special account for France, Canada, and some Nordic nations. Poor nations are expected to be able to use this account money to buy goods from the account's donors or from developing countries - but not from the slow-paying United States.
Another complexity for World Bank officals is the addition of China to its membership. China now wants its share of low-cost IDA funds. This will occur largely at the expense of India, which at one time got as much as 58 percent of the no-interest, 10-year-grace-period loans. That was cut back to some 40 percent because of widespread feeling that India could afford to take more regular World Bank loans at normal interest rates.
Now, it is thought, India may get only 20 percent of the IDA money, China the same percentage, and a larger share will go to the poorest of the African nations.
For India, such a decision is costly. It is already reckoned that its World Bank borrowings - as distinguished from IDA loans - are costing India more than
The US maintains that the IDA should more quickly ''graduate'' countries making economic progress from IDA funds to regular-interest loans from the World Bank. Then, it argues, IDA will not need so much money.
As part of its campaign to win support for IDA, the World Bank commissioned a study on the first two decades of its concessional loan affiliate. The report discusses IDA's mistakes frankly. But its successes have so outweighed these, that the average annual return on some 1,300 projects costing $26.7 billion has been 18 percent, the study says.
A. W. Clausen, president of the World Bank, concludes that IDA ''has done, is doing, and must continue to do an absolutely essential job in helping the poorest countries of the world assume a more meaningful role in the mainstream of the global economy.'' The International Development Association in review (1977 - 1982) 1977 1978 1979 1980 1981 1982 Credit amounts $1,308 $2,313 $3,022 $3,838 $3,482 $2,686 (millions of US] Disbursements $1,298 $1,062 $1,222 $1,411 $1,878 $2,067 (millions of US] Usable resources, cumulative $11,789 $18,062 $19,661 $20,773 $22,331 $25,311 (millions of US] Operations approved 67 99 105 103 106 97 Borrowing countries 36 42 43 40 40 42 Member countries 117 120 121 121 125 130 Source: The World Bank Annual Report 1982