World Bank member countries pledged Thursday to more than double the bank’s aid to the poorest countries and agreed to make loans for developing nations cheaper.
The lender’s governing board approved plans to offer $3.5 billion in 2008-2010 for grants and loans to help the 81 poorest nations, especially in Africa, up from $1.5 billion in the current three-year effort, bank president Robert Zoellick said. Zoellick, a former US deputy secretary of state, has focussed on reinvigorating the 185-nation World Bank as a source of loans for poor and emerging countries since he took over as head in July. World Bank members will be looking for a first progress report from Zoellick at the next meeting of the bank and the International Monetary Fund in October. “I am very pleased that the board has helped us put our money where our mouth is,” Zoellick told reporters Thursday.
A substantial part of the increased aid to poorest nations will be funded from the income of a World Bank unit that promotes private- sector development. Additional commitments from donor countries will also be needed, and Zoellick said he hopes to have those wrapped up by the end of 2007. South Africa has already pledged a 30% boost in its share of the International Development Association (IDA), the World Bank arm that helps the world’s poorest countries. China and Brazil have given positive signals, Zoellick said. At issue is the next three-year phase of IDA, which starts July 1, 2008. India, Pakistan, Nigeria, Vietnam and Ethiopia lead the list of IDA borrowers, but overall half of the loans go to sub-Saharan Africa. World Bank directors also decided to cut prices for the agency’s loans to about 80 poorer and middle-income countries, erasing a 1998 price hike in the wake of the Asian financial crisis, and to simplify the bank’s loan rules.
Zoellick called it “a valuable step forward” in efforts to reverse a drop in World Bank lending to middle-income countries, a group that includes growing economic powers such as China and Brazil. Countries looking for development loans are increasingly turning to financial markets instead of the World Bank. The bank’s cut in loan pricing reduces the so-called interest spread from about 60 percentage points to 26 points, Zoellick said. “We believe this will be very competitive for many middle-income countries, even those that are borrowing in markets today,” he said. (m&c,com)