US assigns higher priority to World Bank, IMF issues

For years, the International Monetary Fund and the World Bank have been low on the United States' list of foreign-affairs priorities. That's changed.

The two multilateral institutions, assembling this weekend at their Washington headquarters for their joint spring meeting, have assumed new importance.

The big reason: Sept. 11.

The events of that day showed how problems in one part of the world can wreak destruction thousands of miles away. President Bush, in fact, has spoken of poverty – one of the key problems that appeared to bring on the attacks – as a "breeding ground for terrorists."

That conclusion has led the American political right to share more concerns with the left about the importance of economic development in poor nations. The issue will figure high on the meeting agendas of the two financial institutions – and will be a rallying point for the now-familiar protesters outside.

It could mean even more official scrutiny of two organizations that in recent years have faced increasing grass-roots criticism. "What's unprecedented is that so many political actors care about what the IMF and the World Bank are doing," says William Easterly, an economist at the Center for Global Development (CGD), a Washington think tank. "This is a new experience for them."

At the United Nations International Conference on Financing for Development in Monterrey, Mexico, last month, Mr. Bush spoke of his new pledge to seek a 50 percent increase in America's foreign aid by 2006.

That shift surprised the world. For perhaps 20 years, the US has talked to other countries about desirable development policies. But in relative terms, America opened its pocketbook only slightly to pay for foreign aid. As a result, foreign ministers looked on US advice with skepticism.

"Now, for the first time in a generation, the United States has a certain degree of stature and credibility as a leader in the foreign-aid debate," says Frank Vogl, vice president of Transparency International, a Washington group trying to stem corruption in developing countries.

The US move will increase pressure on Japan and Europe to step up their foreign aid as well – something they have long proclaimed as their intent.

Hundreds of activists outside the meetings are expected to weigh in on the issues as well. Already on Wednesday, for instance, a coalition of the AFL-CIO and more than two dozen labor, environmental, religious, development, and gender groups issued a 36-page report calling for a host of bank reforms. These include giving more debt relief to poor countries, making more grants rather than loans, and measuring better the results of its loans for health and education programs.

In addition, the CGD and the Institute for International Economics, another Washington research group, yesterday called on the IMF to sell some of its gold to finance further debt relief for the poorest countries.

Inside the joint meeting, a representative group of ministers and central bankers from the institutions' 180-plus member nations will be considering a program to achieve universal primary education by 2010. At present, 100 million children, disproportionately girls, do not attend school at all.

In addition to poverty reduction, the agenda will also explore ways to increase the effectiveness of aid and remove rich-country barriers to exports from poor nations. In the case of agricultural exports, industrialized nations as a group spend $350 billion on subsidies for their farmers, thereby often excluding farm imports, says World Bank spokeswoman Caroline Anstay. Those subsidies are seven times greater than the total of foreign aid.

A World Bank development report to be issued tomorrow will note that growth rates of per capita income in poor lands must double from the 1990s rate if they are to reach a UN goal of cutting world poverty in half. Sub-Saharan Africa is not on track, the report adds.

At the sessions involving the IMF, there will be discussions on how to prevent and resolve economic crises such as those in Argentina and Turkey.

Many critics charge the IMF with imposing conditions on loans that are wrong or too tough for troubled nations. The delegates will review this "conditionality."

A Sept. 11-related topic will be money laundering and terrorism.