[stop-imf] O'Neill Denounces World Bank

Thu, 21 Feb 2002 14:28:04 -0800

--------------DFBBBF4344274046195D36DF
Content-Type: text/plain; charset=iso-8859-1; x-mac-type="54455854"; x-mac-creator="4D4F5353"
Content-Transfer-Encoding: 8bit

The New York Times
February 21, 2002
Treasury Chief Accuses World Bank of Harming Poor Countries
By JOSEPH KAHN

WASHINGTON, Feb. 20 ó Treasury Secretary Paul H. O'Neill said today that
the World Bank had driven poor countries "into a ditch" by lending
instead of donating funds to fight poverty, and he sharply criticized
allies for failing to back a plan to revamp aid policies.

None of the United States' counterparts in the Group of 7 industrialized
nations has endorsed a proposal by President Bush that would convert
half of all development loans to grants despite months of lobbying by
Washington.

Britain, France and Germany insisted at a recent negotiating session
that Mr. Bush's proposal could hobble the World Bank, the main lender to
poor nations.

In a well publicized speech last July, Mr. Bush called grants like these
"compassionate conservatism at the international level."

His argument was that it made more sense to donate money for health,
education and sanitation projects than to burden poor countries with
debt.
Mr. Bush said he would like to see "up to 50 percent" of the World
Bank's $6 billion in annual outlays for the poorest countries provided
in grants, compared with about 1 percent now.

European countries have remained cool to the idea, arguing that making
countries pay back the money, even over 40 years at low interest rates,
instills discipline among borrowers and lenders. Some officials also say
they fear that the Bush administration's proposal could undermine the
World Bank by forcing it to give away its capital.

European leaders have said they could support converting as much as 10
percent of the bank's loans to grants. Canada and Japan have indicated
that they would back converting 16 percent. Both are far from the
American goal of 50 percent.

Speaking to experts at the International Institute of Economics in
Washington today, Mr. O'Neill sharply questioned the logic of Europe's
position. "I say the hell with it," he said.

"Somebody tell me a good reason for 10 percent."

Mr. O'Neill said the United States had indicated some flexibility in
what percentage of aid should be made in the form of grants, but
suggested that 10 percent was too low.

"It's hard for me when I look at primary education and I look at the
stage of underdevelopment for billions of people, it's hard for me to
say, well, let's do post-conflict countries and let's do a little
H.I.V./AIDS and keep it under 10 percent," Mr. O'Neill said.

American officials had hoped to persuade allies to remake the World
Bank's antipoverty programs before Mr. Bush attends a development
meeting in Monterrey, Mexico, next month. But officials involved in the
talks say any overhaul will be much more modest than Mr. Bush and Mr.
O'Neill once envisioned.

Mr. O'Neill expressed frustration at the difficulty of changing the
World Bank, which he suggested had failed to achieve its desired goals
of alleviating poverty at least in part because it contributed to a debt
crisis among poor countries.

Lending agencies have "driven them into a ditch" by extending loans that
borrowing nations have trouble repaying, he said, adding that heavy debt
loads frighten away global investors.

--------------DFBBBF4344274046195D36DF
Content-Type: text/html; charset=iso-8859-1
Content-Transfer-Encoding: 8bit

<!doctype html public "-//w3c//dtd html 4.0 transitional//en">
<html>
The New York Times
 February 21, 2002
 Treasury Chief Accuses World Bank of Harming Poor
Countries
 By JOSEPH KAHN
 &nbsp;
WASHINGTON, Feb. 20 — Treasury Secretary Paul H. O'Neill said today
that the World Bank had driven poor countries "into a ditch" by lending
instead of donating funds to fight poverty, and he sharply criticized allies
for failing to back a plan to revamp aid policies.
None of the United States' counterparts in the Group of 7 industrialized
nations has endorsed a proposal by President Bush that would convert half
of all development loans to grants despite months of lobbying by Washington.
Britain, France and Germany insisted at a recent negotiating session
that Mr. Bush's proposal could hobble the World Bank, the main lender to
poor nations.
In a well publicized speech last July, Mr. Bush called grants like these
"compassionate conservatism at the international level."
His argument was that it made more sense to donate money for health,
education and sanitation projects than to burden poor countries with debt.
 Mr. Bush said he would like to see "up to 50 percent" of the World
Bank's $6 billion in annual outlays for the poorest countries provided
in grants, compared with about 1 percent now.
European countries have remained cool to the idea, arguing that making
countries pay back the money, even over 40 years at low interest rates,
instills discipline among borrowers and lenders. Some officials also say
they fear that the Bush administration's proposal could undermine the World
Bank by forcing it to give away its capital.
European leaders have said they could support converting as much as
10 percent of the bank's loans to grants. Canada and Japan have indicated
that they would back converting 16 percent. Both are far from the American
goal of 50 percent.
Speaking to experts at the International Institute of Economics in Washington
today, Mr. O'Neill sharply questioned the logic of Europe's position. "I
say the hell with it," he said.
"Somebody tell me a good reason for 10 percent."
Mr. O'Neill said the United States had indicated some flexibility in
what percentage of aid should be made in the form of grants, but suggested
that 10 percent was too low.
"It's hard for me when I look at primary education and I look at the
stage of underdevelopment for billions of people, it's hard for me to say,
well, let's do post-conflict countries and let's do a little H.I.V./AIDS
and keep it under 10 percent," Mr. O'Neill said.
American officials had hoped to persuade allies to remake the World
Bank's antipoverty programs before Mr. Bush attends a development meeting
in Monterrey, Mexico, next month. But officials involved in the talks say
any overhaul will be much more modest than Mr. Bush and Mr. O'Neill once
envisioned.
Mr. O'Neill expressed frustration at the difficulty of changing the
World Bank, which he suggested had failed to achieve its desired goals
of alleviating poverty at least in part because it contributed to a debt
crisis among poor countries.
Lending agencies have "driven them into a ditch" by extending loans
that borrowing nations have trouble repaying, he said, adding that heavy
debt loads frighten away global investors.</html>

--------------DFBBBF4344274046195D36DF--