Short blocks US plan for World Bank grants
A plan to boost World Bank aid to the developing world has been delayed by a disagreements between the US and some European countries, led by Britain, over Washington's wish to give half the money in grants rather than long-term loans. The US treasury secretary, Paul O'Neill, argues that...
A plan to boost World Bank aid to the developing world has been delayed by a disagreements between the US and some European countries, led by Britain, over Washington's wish to give half the money in grants rather than long-term loans.
The US treasury secretary, Paul O'Neill, argues that it would be simpler to convert half the aid given by the bank's International Development Association (IDA) to grants instead of saddling poorer countries with more debt.
The overseas development secretary, Clare Short, backed by the Nordic countries, has rejected the proposal. According to World Bank and British officials she feels that aid recipients are less likely to squander money if it is lent, no matter how cheap the terms.
IDA loans, intended for the poorest counties, usually have a 10-year grace period and are repaid over 40 years.
The European position reflects a fear that the US is motivated by a wish to undermine the long-term independence of the World Bank.
If it no longer made loans, the bank would no longer receive interest and capital payments and would become dependent on funding from rich industrialised countries.
US officials insist that the use of grants may be essential for regional programmes without a short-term measurable economic return, such as programmes to combat Aids.
They say that many countries are reluctant to accept help for such projects if it increases their debt.
France has suggested as a compromise that 10% of IDA help should be in grant form.
The normally tepid technical discussions have been enlivened by Mr O'Neill and Ms Short, who both have a reputation for plain speaking.
A World Bank official described Ms Short as particularly "forceful and colourful".
The impasse has held up agreement on a plan to increase IDA funding by 16% in the next three years to £8.7bn, on which both Britain and the US agree.
An attempt in Switzerland last month to resolve disputes about how the money should be spent broke down.
John Donaldson, the World Bank's adviser on US affairs, said a deal should be resolved this year. "There is a general consensus that there will be a consensus."
The US treasury secretary, Paul O'Neill, argues that it would be simpler to convert half the aid given by the bank's International Development Association (IDA) to grants instead of saddling poorer countries with more debt.
The overseas development secretary, Clare Short, backed by the Nordic countries, has rejected the proposal. According to World Bank and British officials she feels that aid recipients are less likely to squander money if it is lent, no matter how cheap the terms.
IDA loans, intended for the poorest counties, usually have a 10-year grace period and are repaid over 40 years.
The European position reflects a fear that the US is motivated by a wish to undermine the long-term independence of the World Bank.
If it no longer made loans, the bank would no longer receive interest and capital payments and would become dependent on funding from rich industrialised countries.
US officials insist that the use of grants may be essential for regional programmes without a short-term measurable economic return, such as programmes to combat Aids.
They say that many countries are reluctant to accept help for such projects if it increases their debt.
France has suggested as a compromise that 10% of IDA help should be in grant form.
The normally tepid technical discussions have been enlivened by Mr O'Neill and Ms Short, who both have a reputation for plain speaking.
A World Bank official described Ms Short as particularly "forceful and colourful".
The impasse has held up agreement on a plan to increase IDA funding by 16% in the next three years to £8.7bn, on which both Britain and the US agree.
An attempt in Switzerland last month to resolve disputes about how the money should be spent broke down.
John Donaldson, the World Bank's adviser on US affairs, said a deal should be resolved this year. "There is a general consensus that there will be a consensus."
Use the feedback form below to submit your comments.
Use the form below to email this article to your friends.
- World Bank Admits Most Health Aid Fails
- Mexico Granted $205m Swine Flu Loan From World Bank
- US Surrenders Power to Appoint World Bank President
- World Bank Warns on 'human Crisis' of High Food Prices
- Israeli Restrictions Leave Palestinians Dependent on Aid, Says World Bank
- World Bank's $1.2bn Fund to Feed the Poor
- World Bank: Rocketing Food Prices Have Put Fight Against Poverty Back 7 Years
- World Bank Urges Israel to Ease Palestinian Blockade
- World Bank Accused of Razing Congo Forests
- Zoellick Confirmed As World Bank Chief
- Washington Veteran Gets Nod for World Bank Post
- White House Turns to Veteran Diplomat to Head World Bank
- After Bitter Battle, Wolfowitz Resigns From World Bank
- Wolfowitz to Resign As World Bank President
- Checkpoints Hurt Israeli Security, Says World Bank
- World Bank Criticises Israel Over Palestinian Economy
- Venezuela Quits Imf and World Bank
- Wolfowitz Absent As World Bank Board Decides Fate
- Wolfowitz's World Bank Deputy Tells Him to Quit
- History of The World Bank
- IMF and World Bank: Differences