The World Bank, which has significantly increased emergency lending since 1980 to counter recession in the Third World, plans to revert to its more traditional emphasis on long-term project lending, its president, A. W. Clausen, said yesterday.
Agriculture and rural development will continue to account for about one-third -- the largest single share -- of bank activity, he said in a speech to the Foreign Policy Association in New York.
Although many inside and outside the bank have urged it to expand reliance on innovative loans that pump development capital more quickly into borrowing countries, Clausen said that the project approach is the key to long-term Third World growth.
"One cannot 'jump start' a developing economy. We have to be able to respond with support that can be sustained over a number of years," Clausen said.
He noted that "the preoccupation" of policy makers with crisis management is easy to understand, but argued that it is the special job of the bank, "as a long-term development institution, to look past current crises" and address longer-term issues vital to growth and social progress.
Among the important longer-term issues he mentioned are population growth and expanding the educational and job opportunities for women.
The division of the bank's aid between long-term projects and newer techniques such as structural loans and sector adjustment loans will be discussed at a future board meeting and debated at the bank's annual session in Soeul, Korea, in October.
These loans, which accounted for 17 percent of total bank loans in fiscal 1984, were created to help borrowers cope with balance-of-payment problems that followed the second oil shock of 1979.
Clausen said yesterday that the current share held by these loans is likely to stabilize, rather than expand, over the next few years, assuming continuation of a global economic recovery.
Supplementing aid provided by the International Monetary Fund, the adjustment loans program provided a quicker infusion of financial resources than straight project loans, for which not more than 2 to 3 percent of the total is disbursed in the first year after they are signed.
Typically, the bulk of the start-up costs of a World Bank project loan comes from local sources, or from external borrowings by the country involved. The problem has been that these countries haven't been able to fund their share. Thus, many bank-approved projects are on hold, which explains the recent slowdown in total bank lending activity.
But Clausen said yesterday that in the future, the bank must preserve and expand on its traditional project lending role, "keeping long-term investment as the mainstay of our operations, and keeping our commitment to poverty alleviation as firm as ever."
In a book called "Hobbled Giant" published last year, former bank official Stanley Please wrote that because of its dedication to project lending, the bank "is seriously constrained in its ability to use its position to help remove the barriers to more rapid income growth and poverty alleviation in the developing world."
Please wrote that the bank had insisted on stressing projects such as roads, dams, and electric power facilities at a time when less specific loans to ease an economic crisis or to induce a change in a country's economic policy priorities would provide more help.
Clausen acknowledged in his speech that a major lesson of the bank's experience over the last decade is that "a narrow focus on designing and financing good projects does not by itself assure satisfactory development in countries where there are major weaknesses in policies or institutions." A combined approach is required, he asserted.
But he went on to say that in its relationships with client countries, "our primary emphasis in on the progress that can be realistically achieved over the longer term."
In addition, he said the bank should play a "catalytic role," helping to complement or support other official, as well as private lending.