Are you sure?

US loses status as World Bank top donor

The United States lost its status as the largest donor to the World Bank’s main fund for poor countries, the lender said this week, as the UK pledged more in the latest funding round that secured a record amount of aid.

Losing its position as the top donor could weaken Washington’s influence over the World Bank, which is the largest provider of development assistance to poor countries, and over the policies that decide how its cash is spent. The Washington-based lender conducts a fund-raising campaign among its richer members every three years to determine funding for the International Development Association. The IDA is the bank’s lending arm. After negotiations that began in March in Paris and ended with two days of talks in Berlin, Britain promised $4.2 billion for the period from July 2008 to June 2011, World Bank President Robert Zoellick told reporters in a conference call. The US Treasury said it pledged $3.7 billion to the bank’s International Development Association fund, up 30% from its contribution three years ago and the largest increase since the Carter administration in the 1970s.

A senior Treasury official applauded Britain’s move, which amounts to an increase of about 50%. “We made our decision based on what we thought was a solid number - one of the largest increases the United States has ever made - and the UK obviously put in an even greater amount, which means that the overall number for IDA goes up. We think it’s great what the UK did,” said Clay Lowery, US Treasury Assistant Secretary for International Affairs. Lowery said the United States “has no problem” with Britain being a larger donor, adding that it is “good for poor people, which is frankly what we’re mostly concerned about.”

Some 45 donor countries, the most ever, promised a record total of $25.1 billion at the Berlin talks, with a further $16.5 billion coming from the bank and previous donor pledges for financing debt forgiveness, officials told the news conference. The total of $41.6 billion, also a record, represents an increase of $9.5 billion over the previous funding period and will support around 80 countries, mainly in Africa. In a coup for Zoellick, who is in China this week, Beijing was one of six nations joining the list of donors for the first time, along with Cyprus, Egypt and the three Baltic states. “We’re feeling pretty positive, but I’m glad I don’t have to do this every year,” Zoellick said. "The donor community has demonstrated its full commitment to helping countries overcome poverty and achieve sustainable growth, especially in Africa."

Zoellick said the money would go toward helping 2.5 billion people in poor nations across five continents. IDA-financed projects support education, basic health services, clean water and sanitation, as well as environmental safeguards, infrastructure and policy and institutional reform. The latest talks were complicated by slowing economic growth in rich nations and the weakening dollar, which inflates contributions by some other countries when calculated in the US currency. At the same time, the bank’s mission is widening, with governments demanding more help in developing sophisticated economies and markets.

The United States, whose economy is almost six times as big as the UK’s, wanted to hold on to its number one spot as the bank’s largest donor, but it is also struggling with a budget stretched by the wars in Iraq and Afghanistan. The US share of contributions has slowly declined from 22% in 1960, the year of the fund’s inception, to about 14.7% of the fund in the new round. The UK share is now 16.7% of the fund. In comparison, after the previous round of IDA negotiations in 2005, the US share was 13.8% and the UK’s was 13.2%. The $3.7 billion US contribution, which Congress must approve, will be split into annual appropriations requests over the next three years. Germany made the fourth-biggest contribution to the new funding round, boosting its pledge by 18.6% to $2.2 billion, the Development Ministry said. (Business Intelligence)