The Reagan administration has undertaken a comprehensive review of the United States' role in and contributions to all development institutions, including the World Bank, the International Monetary Fund, and regional development banks.
As the first step in this examination -- which portends a general reduction in U.S. participation in multilateral institutions in favor of bilateral aid -- the United States notified the World Bank that "at this time" it can not support or participate in a new World Bank affiliate devoted to creating new energy production in Third World countries.
This amounted to a complete reversal of policy under the Carter administration, which had endorsed the bank affiliate in principle at the Venice economic summit last year. The Reagan administration's decision was conveyed to U.S. summit partners by Treasury Undersecretary Beryl Sprinkel at a meeting in Paris this week and to the World Bank by the holdover Carter administration executive director, Colbert King.
At the same time, it was learned that the compromise decision on the total foreign aid budget that followed a dispute between Office of Mangement and Budget Director David A. Stockman and Secretary of State Alexander Haig leaves a large question overhanging the fate of the bank's concessional aid affiliate, the International Development Association.
King distributed a memorandum on the rejection of the energy affiliate to executive directors on the instruction of Treasury Donald Regan which said: "At this time, the United States can neither support the creation of, nor participate in, a new energy lending institution affiliated with the World Bank which would borrow from private capital markets on the basis of paid-in and guaranteed capital and lend to LDC [less-developed-country] governments for energy development."
The memorandum added, however, that "the U.S. might be able to consider an appropriately structured bank energy entity at some more suitable time. No inference should be drawn from this regarding the eventual U.S. position on the proposed expansion of bank energy lending. The U.S. continues to believe that expansion of energy production in the non-oil-producing developing countries in which the bank will play an important role can reduce pressure on world oil markets, diversity world energy sources and contribute to their economic growth."
Bank officials had anticipated drawing a considerable part of the funds for the energy affiliate from the Arab oil countries, and giving officials of Arab and other oil-producing countries a high profile in the management of the new agency.
Informal sources indicated that the phrase "at this time" was intended to convey the administration's intention to spend many months -- perhaps up to a year -- in looking at the role a Reagan administration feels proper for the multilateral institutions.
Not only will the proposed energy affiliate be re-examined, but also commitments to the IDA after the present three-year term (the so-called Sixth Replenishment) is finished, and a proposal made by outgoing World Bank President Robert S. McNamara last year to accelerate the "gearing ratio" of the bank, that is, the present one-to-one ratio of bank lending to capital. McNamara had proposed a substantial liberalization that could further double the bank's lending power.
Originally, Stockman had proposed to cut in half the Carter administration's three-year commitment of $3.4 billion to the IDA, a slash which would have forced a renegotiation with the other nations involved in this program, IDA money is the basic source of aid to the poorest Asian and African nations. After Stockman and Haig held prolonged talks, the OMB director agreed to fund the entire $3.4 billion in three years -- but with $1.85 billion postponed until the third year, fiscal 1983.
Cynics believe that the three-year commitment is only technically fulfilled in this way.It provides Stockman with low budget number of $5.40 million for fiscal 1981 and $840 million for fiscal 1982. But they believe that Congress is unlikely in calendar 1982 (an election year) to increase IDA funds by a full $1 billion.