Scandal May Jeopardize World Bank Funds

Some African leaders, noting Wolfowitz's focus on the continent, support him. But European officials have suggested that, as long as he remains, they may withhold funds, perhaps funneling more aid through the European Union, which has historically been less focused than the World Bank on helping Africa.

"That would be very bad," said Faida Mitifu, Congo's ambassador to the United States, whose government received $365 million in IDA loans last year.

In the best circumstances, World Bank presidents struggle to raise funds, making it harder than ever for Wolfowitz to do so with this cloud over his head, development experts said.

"The great danger is that this will spill over into the IDA negotiations, that the board will leave this unresolved and that the shareholders will take it out on IDA," said Dennis de Tray, a vice president at the Center for Global Development in Washington. He worried that donors would "treat the World Bank and IDA as an extension of the United States."

Analysts say a funding shortage could weaken the bank's already waning influence at a time when Venezuela's president, Hugo Chávez, is widening his reach in Latin America with aid and populist rhetoric, and as China distributes loans and grants across Africa in pursuit of energy and commodities.

The World Bank's largess often comes with strings, requiring recipient governments to adopt controversial policies such as privatizing state industries. Other loans have fewer obligations, making them more attractive to many leaders.

Wolfowitz asserts the bank would be best served by an end to what he has called the "smear campaign" against him.

"I have worked very hard to build support for IDA," Wolfowitz told the investigating committee. "If I am forced out in a circus-like process, it will only give those who are already looking for a reason not to contribute . . . the excuse they are seeking."

The investigating committee concluded that Wolfowitz broke ethics rules in engineering a job transfer and raise for his girlfriend, a bank official. Wolfowitz has maintained he did nothing wrong, acting with the guidance of the ethics committee by finding her another job to avoid a conflict of interest and compensating her for the career disruption .

The European parliament has called for Wolfowitz to resign. Last week, five former finance ministers from Latin American nations said he must go. But while the bank's executive board has the power to end the president's tenure, some analysts doubt it has the political will.

Under an agreed-upon arrangement that has lasted since the inception of the bank six decades ago, the U.S. president selects the president of the World Bank while Europe decides who runs the bank's sister institution, the International Monetary Fund. President Bush has said he wants Wolfowitz to stay. If the board overrides his wishes, it will jeopardize Europe's claims on the IMF, said a senior administration official.

Analysts surmise that the conflict will ultimately end with a negotiated outcome and not a decisive board vote because no one is sure what would happen were a vote held. The board traditionally operates on consensus. Its members take direction from the foreign governments they represent, for whom the leadership of the World Bank is but a minor foreign-policy issue. In interviews this week, bank officials and analysts said even the governments opposing Wolfowitz were unlikely to authorize their executive directors to vote to remove him, which would risk a fresh imbroglio with the Bush administration.

Most executive directors represent multiple countries. If countries within the blocs are split, that could force the executive director to abstain, making the outcome even more uncertain.

"The executive directors are not going to want to have a decisive vote," said Ralph C. Bryant, a senior fellow at the Brookings Institution who has served as an adviser to the World Bank. "Everybody would like to have somebody else make the hard decision."

Most analysts assume the bank's board will try to finesse the issue, perhaps approving a vote of no confidence in hopes Wolfowitz would then resign. Some argue that if the risks of a vote are large, the damage if the board backs down could be greater.

"If they want to have a multilateral institution, they have to have the gumption to do this and vote," said Colin I. Bradford, a former chief economist at the United States Agency for International Development. "If they don't, you have a double crisis. You not only have a dysfunctional president and a dead replenishment of IDA, you also have a dysfunctional board. You've severely weakened the bank."