Financing third-world growth

In his speech yesterday to delegates attending the 39th joint meeting of the World Bank and the International Monetary Fund, World Bank president A. W. Clausen underscored the vital need to find new ways of providing financial assistance to the developing world.

Loans to developing nations - in particular, commercial bank loans - have come under increasing criticism in recent years, as some nations have edged toward default, or threatened default. And yet, financial assistance, whether through multilateral lending, direct government-to-government assistance, or commercial bank financing, is essential to enable nations to grow. Such assistance enables nations to underwrite development programs or meet balance-of-payments shortfalls.

That is why Mr. Clausen's observations about the need for stepped-up levels of financial assistance from multilateral sources such as the World Bank, as well as direct aid from governments, is important. As he notes, commercial bank lending during the next 10 years is likely to remain constant in real terms or, worse, fall by as much as 40 or 50 percent.

That, of course, would constitute a sharp reversal from the period of the late 1970s, when commercial bank lending grew at a annual rate of around 19 percent.

Two points seem in order:

* Agencies such as the World Bank need to rethink their lending practices. Multilateral agencies will have to use their loan funds more carefully than ever in the decade ahead as nations compete for assistance. The World Bank is currently studying its lending procedures. Such a step is essential.

* The industrial nations need to step up direct foreign assistance programs. The United States, in particular, should do so. US foreign assistance programs now average about 1.7 percent of total federal spending, an amount far less than that contributed by most European nations.

Carefully administered foreign assistance programs should once again be perceived as a vital part of US foreign policy. They should be seen as investments. One example: Some 40 percent of US exports go to third-world nations - the very nations that most need assistance to enable their economies to grow and, in the process, acquire exports.

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