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U.S. Now No. 2 Donor To Fund for Poor Nations

By Anthony Faiola
Washington Post Staff Writer
Saturday, December 15, 2007

Forty-five rich and middle-income nations agreed yesterday to provide a record $25.1 billion to the World Bank for generous-term loans and grants to the world's poorest countries. But for the first time since Dwight D. Eisenhower pushed for the creation of the bank's arm for helping the poorest of nations, the United States will no longer lead its anti-poverty charge.

After 47 years as the biggest donor to the World Bank's International Development Association (IDA), the United States will take a back seat to Britain in funding an organization whose efforts have helped build 8,500 miles of roads in Ethiopia and tripled the number of girls in secondary school in Bangladesh.

Overall, the contributions pledged by the 45 nations were up 42 percent from the IDA's previous global fundraising effort, in 2005. Britain's donation of $4.3 billion over three years -- 49 percent higher than its 2005 gift -- was the single biggest pledge, boosted in part by the stronger British pound and a stepped-up foreign aid policy. The United States pledged $3.7 billion, 30 percent more than its 2005 amount.

U.S. officials stressed that the increase in their pledge was the biggest in three decades. The United States, which provided $22.7 billion in development assistance last year, remains the world's most generous nation in foreign aid. But analysts and some critics described the U.S. fall to No. 2 in IDA pledges as part of a trend, particularly during the Bush administration, of emphasizing bilateral channels that provide greater accountability and more flexibility in promoting U.S. interests overseas. Some have pointed to the Millennium Challenge Corp., the federal agency created in 2004 to lend to poor countries determined to have solid records on "good governance" and "economic freedom."

"This is our biggest increase we've had since the Carter administration and it shows we believe strongly in this institution," said Clay Lowery, assistant Treasury secretary for international affairs. "We think the World Bank is a strong way to get results, but we don't think it's the only way. We will always and continuously look for the best opportunities to get results for the American people."

This year, some surprising new donor countries have emerged -- most significantly, China. Beijing's contribution was relatively small but seen as a symbolic milestone mirroring the changing world marketplace. China, which as recently as 1999 received IDA assistance, has become a major engine of global economic growth and is seeking commensurate international influence in part by increasing foreign aid.

Including money from other bank sources, the IDA will have a record $41.6 billion available to fight poverty in the neediest nations. That achievement is viewed as an early sign of approval for World Bank President Robert B. Zoellick. The former U.S. trade representative took over in July after the tumultuous departure of Paul D. Wolfowitz, who was forced to resign after a bank panel concluded that he broke ethics rules by engineering a raise for his girlfriend. World Bank sources, speaking on the condition of anonymity because of the sensitive nature of the matter, said several large donors -- particularly in Europe -- had signaled that it would be "harder" for them to provide IDA funding if Wolfowitz remained.

"This had something to do with Zoellick," said Edwin M. Truman, a senior fellow at the Peterson Institute for International Economics who was assistant Treasury secretary for international affairs from December 1998 to January 2001. "It seems as if he's managed several things well, including the negotiations on IDA, and I think probably he should be given some credit for pulling off a big increase."

In the push to get more money for loans and grants, World Bank officials put new emphasis on lending to fragile and war-ravaged nations, including Liberia and other African countries. At a time when some nations have favored bilateral aid and nongovernmental organizations focused on specific problems such as AIDS and hunger, the pitch this year was that there is still a role for multilateral lenders willing to take a step back and assess broader development needs.

Even though the United States will be the IDA's second-largest donor, its voting power at the World Bank -- which factors in cumulative donations made over decades -- will not diminish. In a conference call with reporters yesterday, Zoellick dismissed the notion that U.S. influence in IDA would wane. "I don't think it will," he said. "The way our board and our policy works, we try to bring people to consensus."

But some analysts and internal World Bank observers said Britain's push to the top of the IDA donor list is likely to increase pressure for a more "European view" on lending to very poor countries. The British have in general been stronger advocates of lending decisions based largely on need rather than demonstrated accountability, an issue the U.S. has pressed hard in recent years.

"You're seeing a continuation of a trend with the E.U. contributions going up and U.S. dominance subsiding," said Ralph C. Bryant, a senior fellow in economic studies at Brookings Institution. "I think it will have some effect, and I think you will continue to see the European voice increase."

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