Although economic developments among the poor countries were satisfactory last year, oil price increases will make it difficult for some small countries to finance their deficits this year, according to a high World Bank official.
Bank Vice President for Operations Ernest Stern, commenting on the bank's annual report released today, said that if the Organization of Petroleum Exporting Countries raises prices again this year, the financing problems of all developing countries will be worsened.
The bank calculates that for calendar 1979, the current account (trade and services) deficit of the developing countries will be $42 billion, rising to $50 billion in 1980.
These figures assume no further OPEC price increases. (Estimates made privately by other international agencies already peg the 1980 deficit at $55 billion for developing countries).
At current levels, Stern said, these deficits can be financed without undue burdens on international agencies and the private banking system. But it is possible to construct a scenario, he conceded, "in which if there are three or four more (oil) price increases, you will get to the point where you can't finance the deficit."
The annual report shows that the bank's lending operations continued to expand last year, with the International Development Association (the soft-loan affiliate) lending $3 billion, up 30 per cent; and the bank itself lending about $7 billion, up 15 per cent.
IDA, Stern said, "continues to be the largest single source of concessional aid" available to the poor countries -- and 90 per cent of IDA money goes to the poorest areas, where per capita income is $300 or less.
But he said that a legislative tangle in the United States is casting a shadow over the bank's projection of an annual 5 per cent increase in lending over the combined $10 billion figure. The House has voted to condition U.S. participation in all development banks by barring indirect aid to Vietnam, Cuba and some other countries.
Since other countries' contributions to IDA are keyed, in the current "replenishment" of funds, to the U.S. share, a rejection by the bank of conditional U.S. participation would render the other contributions "null and void," Stern said.
Officials hope that the House limitation will be knocked out in the Senate. Similar attempts in the past two years have been stopped by the Senate. However, as the legislation stands, the $3.6 billion request by the Carter administration has been trimme to $2.5 billion.
If this figure is not raised both the bank and the United States stand to lose. Not only will the bank have reduced lendable funds, but the U.S. voting share in the bank stands to fall below the 20 per cent mark that now provides a veto for the United States.
Meanwhile, the report noted that the World Bank executive directors recently agreed to recommend to the board of governors a general capital increase of $40 billion, about doubling the bank's capital stock, but that no follow-up action had been taken.
Stern said that "if we don't get the general capital increase pretty soon," the bank won't be able to maintain its $7 billion pace of lending, much less plan an increase. Without the general capital increase, he said, the level of bank lending would fall to around $5.5 billion.