Sun, Mar 17, 2002 - Page 10 News List

Lenders may change focus

FINANCE The World Bank and the International Monetary Fund, despite years of efforts to relieve poverty in poor nations, have repeatedly failed in their expensive efforts

NY TIMES NEWS SERVICE , NEW YORK

A UN summit in Monterrey, Mexico this weekend is addressing financial issues related to global development. James Wolfensohn, president of the World Bank, will urge rich countries to increase foreign aid.

PHOTO: NY TIMES

Meddling relatives usually mean well but, as everyone knows, sometimes they just make things worse.

To many critics, both expert and casual, the World Bank and the IMF fall into the same camp.

Created 57 years ago to reduce poverty and to stabilize foreign currency markets, the institutions, based a block apart in Washington, have continually struggled to meet the expectations of their big shareholders -- the world's rich nations -- as well as those of their supposed beneficiaries in the developing world.

In Haiti, for example, the World Bank has supported 41 projects over the last 50 years with more than US$1 billion in loans, and the IMF has lent the country US$150 million in the last two decades alone. Yet more than 80 percent of Haiti's population still lives in poverty, compared with 65 percent in 1987. And the conditions on the aid from the World Bank and the IMF -- including removing tariffs and growing crops intended mainly for export, such as coffee -- have allowed imports to displace food crops such as sugar cane and rice. While political upheavals in Haiti undoubtedly share the blame for its destitution, critics say mismanagement and economic policies mandated by the aid packages bear some responsibility.

When global policy-makers convene in Monterrey, Mexico, for the UN Conference on Financing for Development, President Bush is expected to repeat his calls for reform and accountability at the World Bank, which has recently been accused of squandering billions on ineffective projects. The IMF will also have much to answer for. Argentina's recent economic collapse, despite policy prescriptions and billions in aid from the IMF, threw millions of middle-class people into poverty.

The decades-long debate over the role of the bank and the fund heated up in 1997, when Kofi Annan became secretary-general of the US and called for a dialogue on development financing. Since Sept. 11, as rich nations have focused on resentment in the developing world, matters have grown more urgent.

Those rich nations have sent the World Bank and the IMF to face down some of the world's toughest economic problems. Yet the two institutions have often failed to turn deep political backing, world-class brainpower and billions in funds into good results.

Both now say they are improving their performance through internal reforms, even as they also grasp for new responsibilities. But the world's hunger for radical change -- in terms of which countries receive aid, how much is made available and how it is distributed -- could overtake their efforts.

The World Bank makes loans to countries, usually for specific projects, at interest rates that reflect their fiscal conditions. Its locally based staff helps to manage the projects, which in the past focused on building dams, paving roads or wiring electricity grids but now deal more with improving health and education. The IMF sends teams of economists, with billions in loans, to rescue countries facing financial crises. But it, too, makes loans for development.

The bank -- which has lately taken to trumpeting its success in leading fast-developing countries like China and India to higher literacy and lower infant mortality rates -- acknowledges some failures. Its reports state that living standards simply have not improved in much of sub-Saharan Africa, where since the 1960s it has invested tens of billions of dollars, some stolen by corrupt rulers and some built into huge power and transportation projects idly awaiting the use of foreign companies.

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