[stop-imf] World Bank Press Review: IDA deal, grants not loans for HIV/AIDS

[Robert Weissman]

The G7 appear to have finally reached agreement on contributions to IDA,
the World Bank arm that makes loans to the poorest countries. The report
below suggests they may have agreed that all support for HIV/AIDS
projects should be made on a grant rather than loan basis, which would
be an important breakthrough in moving away from the debt treadmill.

There's still a long way to go. Not least of the hurdles is debt cancellation.

Date: Fri, 14 Jun 2002 10:10:34 -0400
From: "World Bank Press Review" <devnews@worldbank.org>


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G-7 Nations Reach Compromise on Aid to Poorest Countries
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G-7 Nations Reach Compromise on Aid to Poorest Countries The United States
has struck a compromise with Britain and other wealthy nations in a dispute
over how the World Bank should provide aid to the world's poorest
countries, a senior administration official said yesterday, reports the
Washington Post (E3).

The compromise -- which would involve more grants than the Europeans
wanted, though less than the Americans sought -- removes a major obstacle
to agreement on a funding plan for the IDA over the next three years. The
world's richest countries have been considering a proposal under which they
would contribute $12.5 billion to the IDA, a 16 percent increase over the
amount that was donated for the three year period ending June 30.

Under the agreed-upon formula, countries with per-capita incomes below
$1 a
day would get 100 percent grants for projects aimed at AIDS prevention and
treatment, and slightly lower percentages for other projects in the "social
sector," such as health and education. But projects in some other sectors,
such as infrastructure, would still be funded with loans.

The deal means that 18 percent-21 percent of World Bank aid through its
lending arm for the poorest countries, IDA, will now come in the form of
grants rather than loans, with countries whose average per capita income is
below a dollar a day receiving almost all their aid as a grant, BBC Online
explains.

But Reuters reports Canadian Finance Minister John Manley said: "My
understanding is that there isn't an agreement yet."

BBC continues the US had been pushing to raise the grant ceiling to 50
percent in the face of strong opposition from Europe, particularly the UK.
While on the face of it the US idea would relieve poor countries' debt
burden, UK ministers have pointed out that without increasing the amount of
money available to the World Bank, the switch to grants risks exhausting
the institution's resources.

AP and New York Times Online reports US officials said in certain areas,
such as AIDS prevention and education, all the support will now be in the
form of grants.

AFP adds the substance of the agreement, endorsed by other donor countries,
means countries where people survive on less than a dollar a day would get
"close to" 100 percent of their aid in grant form, John B. Taylor, US
undersecretary of the Treasury for international affairs said. The G7
meeting is also to produce a final statement outlining steps the Bank
should take to establish "measurable results" from development aid, and
also a reference to the regular replenishment of the fund used for aid to
the poorest.

In related news,  France will stress to its G7 partners, meeting this
Friday and Saturday in Halifax (Canada) in order to prepare the G8 summit
later this month,  the need to respect multilateral trade rules and to step
up their aid to poor countries, French Finance Minister Francis Mer said in
an interview in Le Figaro (France). Francis Mer noted that while developed
countries recognize that increased international trade leads to faster
economic growth, "There's a temptation today for the richest countries to
avoid playing by the rules of balanced free trade."

Mer said he'll also be calling on the US and Japan to adhere to the
European idea that trade in everything except arms has to be freed up so as
to help poor countries improve their living standards. And he said he'll be
pushing his G7 colleagues to approve a new injection of funds for the IDA,
the soft-loan arm of the World Bank. France adheres to the notion that the
best way to help heavily indebted countries escape their debt spiral is to
give grants rather than loans, he said. He will plead for rich countries to
increase their Official Development Aid, concentrate on Africa and support
transparent procedures.

Meanwhile, the Financial Times reports the IMF has revised up its forecasts
for global growth ahead of a meeting of finance ministers from the world's
richest countries this weekend.

German finance ministry officials said the new projections - revealed in a
conference call between Kenneth Rogoff, IMF chief economist, and the Group
of Seven officials - see global growth forecast at 2.9 per cent this year,
against the 2.8 per cent the IMF forecast in April.