The Reagan administration is planning to cut the U.S. contributions to such major multilateral lending institutions as the World Bank in keeping with its goal of retrenchment generally and as a sign of "its determination to spread its economic philosophy" around the world.
Although the figures are not yet final, it was learned that the administration plans to slice the U.S. contribution to the World Bank's subsidized loan pool to an annual level of $750 million from nearly $1.1 billion currently, and drop funds for the Inter-American Development Bank to $50 million from $175 million.
At $750 million, the U.S. contribution to the World Bank's subsidized loan program through the International Development Association would be barely more than half the level originally contemplated by the Carter administration for the current period, and would mean comparable reductions in contributions made to the IDA by other well-off nations.
On the other hand, the Reagan administration will propose to add fractionally to smaller commitments to the Asian Development Bank, which it ranks as highly efficient, and to the African Development Bank, ranked high in terms of humanitarian concern.
These budgetary recommendations will be included in a Treasury report entitled "Assessment of U.S. Participation in the Multilateral Development Banks in the 1980s," which will be published after the fiscal 1983 budget goes to Congress on Feb. 9.
A draft circulated for consultation last Sept. 21 indicates that, while the United States is generally satisfied with the role that all these institutions have played in fostering economic growth in the Third World, it has concluded not only that the U.S. contributions should be trimmed but also that the multilateral agencies should do a better job of supervising how the money is used.
Sources say that there have been adjustments in some of the harsher passages in the early draft, and some "inconsistencies" have been eliminated between the factual narrative developed by the Treasury staff and the "conclusions," largely written by Undersecretary Beryl Sprinkel. But they say the basic thrust of the final report is little changed.
That was borne out by a speech delivered last Thursday by Treasury Deputy Secretary R. T. (Tim) McNamar calling for a circumscribed role for the lending institutions, a reduction in concessional aid, and emphasis on the role of the private sector in Third World development. "Much of what I've said," McNamar told a Brookings Institution audience, is based on the upcoming report.
Yet, the Treasury assessment does not validate the celebrated charge that the World Bank, because it exemplifies government-to-government lending, is helping to spread "socialism." Such a criticism had been mentioned publicly by Sprinkel --without endorsement by him--as one reason for the study when he first announced it a year ago. On the contrary, the Sept. 21 version of the report said not only that the multilateral development banks (MDBs) have for the most part facilitated private capital flows, but that "the extent to which MDB activity appears to have co-opted private sector activity also appears minimal."
It also said that, on the whole, the lending institutions "have been effective in furthering our global economic and financial objectives, and thereby effectively are serving U.S. political/strategic interests." In commenting on such passages, World Bank officials urged redrafting to suggest U.S. interests on the whole were compatible with the bank's, rather than giving the impression that the United States is dominating the bank.
The Sept. 21 version also conceded that "neither bilateral assistance nor private sector flows, if available, are as effective in influencing poor country economic performance as the MDBs." And the concessional aid handed out by the banks, the report said, is "particularly effective in serving U.S. humanitarian interests."
The Sept. 21 draft focused on nine specific recommendations, all keyed to the assumption "that our primary objectives in participating in the MDBs are economic and strategic; i.e., the expansion and maintenance of an international economic and political system which makes the benefits of a free market system available to other countries."
Of these, one (Recommendation No. 2), demanding that the United States develop a plan to eventually phase out public financing (including callable guarantees) for the hard-loan operations, presumably has been watered down in response to vigorous objection by the World Bank. Hard loans are the ones made at regular rates, as opposed to interest free or subsidized rates. "This would have been the end of the World Bank--finis," said one official.
The eight other key recommendations, supposedly intact, are:
* Recommendation No. 1--The United States must maintain its "leadership role," but "given overall budget restraint, this recommendation cannot be pursued through ever-increasing U.S. contributions."
* Recommendation No. 3--The United States should begin to give less money to IDA, the principal source of funds for the poorest countries in Asia and Africa.
* Recommendation No. 4--Priority should go to hard loans, which are financed with small budget costs in callable capital, over soft loans, which take large budget outlays, and to the World Bank over regional banks.
* Recommendation No. 5--"Lending policies and programs should increasingly emphasize private sector development and financial participation."
* Recommendation No. 6--The banks' programs, by sector and country, should be more flexible, "less target-oriented" and more selective in terms of quality. In addition, the banks "could concentrate their lending in those sectors where they have the most expertise and where they will have the most levrage."
* Recommendation No. 7--In making loans, the banks should make sure that the recipient nations' priorities "are consistent with the basic economic principles to be promoted by the MDBs"--described elsewhere in the document as market-oriented.
Recommendation No. 8--The World Bank and the regional banks should accelerate the "graduation" process, by which countries move out into the private market.
Recommendation No. 9--Similarly, the "maturation" process should be hastened so that soft-loan clients of IDA are moved up to the bank's hard-loan window "as rapidly as their debt servicing capacity permits."