The World Bank plans a special $1 billion lending facility for a group of hard-pressed African nations that show promise of turning their economies around, bank Senior Vice President Ernest Stern announced yesterday.
The new facility is expected to be launched officially after a meeting of donor nations in Paris next Thursday and Friday. It will be administered by the bank and, in effect, would supplement other concessional funds being funneled to sub-Saharan Africa through the International Development Association, the bank's "soft-loan" arm.
But a bank statement said that this extra money "is only a fraction of what is needed -- much needs to be done bilaterally as well." The bank loaned $9.5 billion to African nations from 1979 to 1983 and, despite the reduction in IDA funds, expects to lend $11 billion in the 1984-88 period.
Stern said that preliminary conversations had virtually assured that the $1 billion new facility could be put together and the money disbursed on terms similar to IDA's 50-year grants with a 10-year grace period. The Netherlands already has pledged $100 million, and large contributions also are expected from other European and Persian Gulf nations. The bank itself will contribute between $75 million and $100 million to the facility from the extraordinary profits it has been making on regular bank loans and investments. (A share of bank profits also is provided to IDA).
Stern said that the United States will attend the conference, although it is clear that this country, having made commitments for African assistance in other ways, will not make a donation.
Stern, who will represent the bank at the Paris meeting, said that the $1 billion -- to be disbursed over three years -- could play an important "catalytic role" in African recovery. He added that there would be two main criteria governing eligibility for loans from the new facility: adequate efforts to achieve price stabilization and some success in the overall "adjustment" process. He estimated that some 20 countries would be able to draw on the fund.
African nations now are allocated about 35 percent of the IDA money -- or just over $1 billion a year. In prior years, when the total IDA program amounted to about $4 billion annually, Africa got 29 percent, or about $1.2 billion. According to the bank, this means a cut of more than 20 percent in real terms at a time when the economic condition of most of the region "is grim and the outlook is bleak." The new facility is meant to fill this gap, at least partially.