Global Policy Forum

By Carol Giacomo

Corrupt use of World Bank funds may exceed $100 billion and while the institution has moved to combat the problem, more must be done, the chairman of the U.S. Senate Foreign Relations Committee said on Thursday. Sen. Richard Lugar, an Indiana Republican, charged that "in its starkest terms, corruption has cost the lives of uncounted individuals contending with poverty and disease."

He commended World Bank President James Wolfensohn for bringing greater attention to the issue, but said, "Corruption remains a serious problem."

Lugar opened a hearing on corruption at the multilateral development banks, the first public examination in an ongoing Senate investigation.

He cited experts who calculated that between $26 billion and $130 billion of the money lent by the World Bank for development projects since 1946 has been misused. In 2003, the bank distributed $18.5 billion in developing countries.

Jeffrey Winters, an associate professor at Northwestern University, said his research suggested corruption wasted about $100 billion of World Bank funds, and when other multilateral development banks are included, the total rises to about $200 billion.

Damian Milverton, a bank spokesman, later disputed the $100 billion estimate, insisting it had "no basis in fact."

"We completely reject the figure offered by one of the panelists as an estimate of funding from the World Bank that might have been misused," Milverton told Reuters.

Winters testified that the World Bank's anti-corruption effort was having "minimal effects" and the banks should all focus on supervising and auditing their lending.

"The lion's share of the theft of development funds occurs in the implementation of projects and the use of loan funds by client governments," he said.

Like other United Nations agencies, World Bank rules prevent staff from testifying in public so Wolfensohn was not at the hearing. But senior bank officials on Monday privately briefed lawmakers on its anti-corruption efforts, a bank spokesman said.

Carole Brookins, the U.S. executive director on the World Bank board, defended the bank saying it was leading efforts to fight corruption, but acknowledged "there is more that could be done to strengthen the system." More than 180 companies and individuals have been blacklisted from doing business with the World Bank and their names and penalties posted on the bank's public Web site.

Between July 2003 and March 2004, it said it referred 18 cases of fraud or corruption to national justice authorities based on investigations by its anti-corruption unit.

Specific bank projects under review by the committee include the Yacyreta dam on the Argentina-Paraguay border, the Lesotho Highlands Water Project and projects in Cambodia.

Hector Morales, acting U.S. executive director to the Inter-American Development Bank, testified that his institution recently accelerated anti-corruption efforts "but still has much work to do."