World Bank President A. W. Clausen told the annual joint meeting of the bank and the International Monetary Fund today the world economic situation is "grim . . .onerous and difficult."
Despite the grim outlook, Clausen told the meeting's opening session there was little prospect of real growth in either the regular or concessional aid programs of the bank.
Clausen added that the International Development Association (IDA) program was at a crossroads. And he bluntly laid at the door of the United States the failure to meet its commitments to IDA, which he said was "amputating" the program.
In his speech, Clausen delivered a strong defense of IDA, which has often been attacked as a welfare program, or ineffective boondoggle. Clausen said IDA has been "tremendously successful."
Clausen cited a new study of IDA which he called " a candid and frank appraisal showing some of the glitches and horrible mistakes that IDA has made. And you can read about those mistakes in the report. But we have a better world because of IDA, not in spite of it.
Clausen demanded that the rich industrial donors to IDA, in their own "enlightened self-interest" renew their pledges for fiscal 1983 and 1984, and make positive decisions about continuing IDA in the future.
IDA's problem arises because the United States has already stretched its original commitment of $3.2 billion for what was to have been a three-year program ending in fiscal 1983 through to fiscal 1984. In effect, the United States has cut its contributions by about 35 percent, and since other nations, under the original agreement, are entitled to reduce their shares on a pro rata basis, IDA last year suffered a short fall in available funds for lending from $4.2 billion to $2.8 billion.
In meetings here in Toronto, most of the other donor countries have agreed to release the remainder of their contributions to IDA for the current period--known as IDA-6--in full. This is expected to mean that the concessional agency will be able to commit perhaps $3.2 billion to $3.5 billion for fiscal 1983.
In addition, these other nations have agreed to provide additional money up to one-third of the original IDA-6 program for fiscal year 1984 either by delivering the money directly to IDA, or establishing what is called a "parallel fund" which would mean that such monies could be spent only in the countries directly involved.
The question then is agreeing on a program for fiscal 1985 and beyond, which would be called IDA-7. President Reagan and other summit conference leaders agreed last June and July that there would be an early start on discussion of IDA-7. But without being specific, the World Bank president said that for future lending programs, "We have got to be more ingenious and creative, and to see if we can't get more private sector money flowing. In the past, Clausen has talked about an IDA-7 replenishment that would rely in part on borrowed, rather than donated, money.
In part, this is a reflection of American tight-fistedness in respect to IDA. Not only does the U.S. protest that budgetary considerations force it to be less generous than in the past, but the Reagan administration has an ideological preference for providing aid wherever possible through the private sector.
Most of the pressures at this meeting run the other way.
The chairman of the joint session, Abdlatif Y. Hamad, minister of finance of Kuwait, in his opening remarks today stressed that "IDA is one of the most outstanding achievements" of the international system in the post-war era. He said it was imperative that all participants "preserve the integrity of IDA and restore its resources."
But Clausen's new vision of IDA would shift the agency from its present grant basis (it charges zero interest plus only a three-quarters of one percent service charge) to one charging, perhaps, five or six percent interest.
As for the bank itself, Clausen said that "if we stick" to a planning figure of $60 billion in loan programs for the five years ending in fiscal 1986, "there is likely to be little if any real growth in bank lending over the next few years."