Global Policy Forum

By Warren Vieth

Members renew pledges to assist poor countries that they concede they have failed to fulfill. Reconstruction of Iraq may drain the aid pool.

World financial leaders acknowledged Sunday that they are in danger of losing "the other war," conceding that their failure to follow through on past pledges is contributing to global poverty, health crises and other ills. Members of the International Monetary Fund and the World Bank ended their spring meetings here with fresh promises to participate in the reconstruction of Iraq. But their enthusiasm was tempered by a recognition that the postwar rebuilding program could drain resources from efforts to assist other countries in need. "Our mandate ... is to sharpen the endeavor to drive out poverty wherever it exists," said South African Finance Minister Trevor Manuel. "It is very important that the bank and the fund remain focused on that."

Yet even as finance officials declared their determination to honor commitments to Third World development, their track record came under fierce attack from critics within and outside the two institutions. World Bank chief economist Nicholas Stern accused wealthy nations such as the United States, Japan and European countries of not living up to their end of a bargain struck when a new round of global trade talks began in 2001. Although developing countries have made progress in reforming their policies, institutions and governments, he said, rich countries have done little to reduce barriers to agricultural and apparel imports. "The barriers to trade that the rich countries put in the face of poor countries are absolutely outrageous," Stern said. "They're telling poor countries to open up their markets to get the benefits of trade and growth but at the same time closing their markets in precisely those areas where developing countries have a comparative advantage."

Stern said trade barriers are doing more harm to the world economy than anxiety associated with the U.S. military offensive in Iraq -- an unease that over the last year, the World Bank estimates, has reduced global growth by 0.5%. Removing import tariffs could boost global trade by as much as $800 billion annually, he said, and add 2% or more to economic growth. Outside the beige and gray buildings where the finance ministers gathered behind barricades, several hundred multihued protesters offered their own critiques.

Neil Watkins, coordinator of the World Bank Bonds Boycott, denounced the institutions for taking no substantive action on Third World debt relief other than to endorse a U.S. proposal to consider reducing Iraq's massive foreign debt, which is estimated at between $60 billion and $130 billion. Iraq also owes about $200 billion in reparations from the 1991 Persian Gulf War. "These meetings show that the United States is calling the shots," Watkins said as several dozen "Black Bloc" militants engaged in a standoff with police a few feet away. "When the United States thinks the debt is illegitimate, it gets canceled. When women and poor people's groups think it's illegitimate, it gets ignored."

The issue of Iraq and its reconstruction needs, estimated at $100 billion or more, was a source of tension at the meetings. Although the basic mission of the two institutions is to help nations in distress, some members appeared to resent the Bush administration's sudden interest in soliciting postwar aid after rebuffing efforts by other nations to slow the march toward war. The result was a delicately worded communique that expressed a collective desire to help with Iraq's recovery but avoided making specific commitments that could be translated into dollars and cents or definitive timetables. "The present situation in Iraq poses significant challenges, with an urgent need to restore security, relieve human suffering and promote economic growth and poverty reduction," the IMF and World Bank Development Committee said. At the same time, the panel said it would not abandon "the global effort needed to reduce poverty in developing and transition countries."

According to a World Bank analysis released Sunday, that effort is falling short. Three years ago, wealthy nations endorsed an ambitious "Millennium Challenge" agenda that called for reducing by half the percentage of people living in extreme poverty by 2015. Other goals included reductions in child mortality and AIDS and expanded access to education and safe drinking water. Although many regions of the world have made progress in reducing poverty, the World Bank said, conditions are worsening in others, particularly sub-Saharan Africa. If current trends continue, the number of people surviving on less than $1 a day is expected to climb in the next 12 years from 315 million in Africa in 1999 to 404 million, and from 6 million in the Middle East to 8 million over the same period. Progress toward increasing school enrollment and reducing illiteracy has been mixed, the analysis said, with about half the world's regions appearing unlikely to achieve their millennium goals. The outlook for improving health is even worse, it said. Although many problems contribute to the poor performance, such as the HIV/AIDS pandemic in Africa, one factor has been the failure of wealthy countries to come up with the estimated $50 billion a year in additional aid needed to help poor countries, said economist Stern. "Aid has never been more productive than it is now," Stern told reporters. "At the same time, aid as a fraction of [gross domestic product] of rich countries has never been lower than it is now in the last half-century or so. That is a paradox that is troubling."

World Bank officials expressed gratitude for a U.S. initiative, announced Sunday by Treasury Secretary John W. Snow, to seek an additional $100 million in funding this year for the bank's International Development Assn. The association, Snow said, "is making strong progress toward ensuring that development resources are invested effectively. President Bush wants to be certain that assistance will deliver results on the ground."

World Bank President James D. Wolfensohn said it remained unclear how donor countries would come up with the estimated $20 billion a year needed for Iraq's reconstruction. "There are those who think it will come from oil revenues, and most people think it will come from somebody else," Wolfensohn said. "I think we're at the beginning of that negotiation." But he expressed confidence that the IMF and the World Bank would not assist Iraq at the expense of other countries, and he said that officials attending the meetings had spent most of their time discussing their traditional development objectives. "Although Iraq gets all the questions, the agenda was on the development process," he said. "It was on the other war, the war against poverty. And that was a very full discussion."

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