By Alan Friedman
International Herald TribuneSeptember 22, 2000
The World Bank is ready to offer emergency funding to poor nations that face financial troubles because of high oil prices, James Wolfensohn, the Bank's president, said Thursday. At the same time, the World Bank is exploring ways to protect poor-country exporters of such commodities as cocoa or coffee that risk financial crisis because of slumping world prices and falling foreign exchange earnings, Mr. Wolfensohn said in an interview with the International Herald Tribune.
The high price of energy means that a number of developing countries "could find themselves owing money to oil producers, getting more deeply into debt and exacerbating their financial difficulties," Mr. Wolfensohn said. "While OPEC is the only organization that can really do something about the high energy prices, and the world should keep pressure on OPEC to increase production, we are ready to help," he said.
He said the World Bank could make available "structural loans and other forms of emergency funding" to poor oil-consuming countries if necessary. The other side of the coin, Mr. Wolfensohn said, is the sharp slump in some commodity prices that is wreaking havoc for several developing countries. "I think the issue of protecting producers from big fluctuations in commodity export prices is valid," he said.
Mr. Wolfensohn stressed that the World Bank was not seeking to create any price guarantees but rather to create a mechanism that would help small countries facing a serious cash shortfall. World Bank data show that more than 50 developing nations depend on just two or three commodities for more than half of their entire export earnings. Since the spring of 1998, cocoa prices have fallen by about 50 percent, affecting countries as far flung as Indonesia and Ivory Coast, according to the World Bank.
In the same period, it said, coffee prices have dropped 44 percent to 58 percent on world markets, hurting such countries as Brazil, Colombia, Indonesia and Vietnam. A year ago, the Bank's executive board began discussing proposals to help developing countries protect themselves by gaining access to sophisticated financial-hedging techniques that they normally would not know how to use. The aim was to avoid periodic financial crises triggered by volatile price swings.
But the United States and France were cool to the initial World Bank working group's ideas and sent the team back to the drawing board. It is this group, the International Task Force on Commodity Risk Management in Developing Countries, that is being backed by Mr. Wolfensohn. "We are not seeking any price guarantees but a way to ensure that if you are a small cocoa producer, you can protect yourself and hedge against price changes just like big corporations such as Cargill," he said in the interview.
In Prague on Thursday, Mr. Wolfensohn also said at a news conference that it was "a crime" that aid from the rich industrialized world to developing countries had declined over the past decade. He said he planned to work closely with Horst Koehler, the new managing director of the International Monetary Fund, to battle poverty and aim at reducing the debt burden of 20 African nations by the end of this year.
As protesters began arriving in Prague in time for the annual meetings of the IMF and the World Bank, Mr. Wolfensohn struck a conciliatory note, saying, "My view about the demonstrations, or planned demonstrations, is not wholly negative, by any means." He said he was "pleased" that there was a growing awareness around the world of such issues as equity, poverty and globalization. Although critics say that these kind of remarks from the heads of the World Bank and the IMF appear aimed at disarming protesters, Mr. Wolfensohn insisted Thursday that with "20 percent of the world controlling 80 percent of global income," the poverty problem could lead to global instability in future.
"It is our hope that we will be able to encourage the developed countries to recognize that it is in their interest to bring about poverty alleviation in the developing world," he said, "because we are one world and unless we get stability and growth in the developing world, we're not going to have a peaceful world."
Asked whether the World Bank was prepared to offer aid to Serbia if President Slobodan Milosevic were voted out of power in Yugoslav elections this Sunday, Mr. Wolfensohn did not answer the question but hinted that this might be the case. "We'll have to take a look at what happens in the elections," he said. "We're certainly interested, at the right moment, in helping Serbia."
More Information on the World Bank
FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C íŸ 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.