The World Bank said Sunday the impact of recent turbulence in financial markets on developing countries has been limited and global economic growth remains strong.
The bank also called on donor governments to meet their commitments to boost aid for development and said countries with fast-growing economies and mounting currency reserves could bring new resources to this effort.
The bank’s policy-setting Development Committee said its members “agreed that strengthened support for the inclusion and empowerment of the poorest in development, especially in sub-Saharan Africa, and for engagement by the bank group in fragile and conflict-afflicted states must be key elements in the strategic framework.
The Development Committee session followed a meeting of the bank’s sister institution the International Monetary Fund.
In a lecture sponsored by the IMF, former Federal Reserve Chairman Alan Greenspan warned that rising protectionism could undermine the ability of the United States to deal with large deficits.
“If the pernicious drift toward fiscal instability in the United States and elsewhere is not arrested and is compounded by a protectionist reversal of globalization, the current account deficit adjustment process could be quite painful for the United States and our trading partners,” he said.
At a news conference the bank’s new president Robert Zoellick and the head of the IMF, Rodrigo de Rato, said they were exploring ways the fund could start the ball rolling on reducing debt for Liberia.
“This is a country that is helping itself and deserves to be helped by the international community,” de Rato said.
In February, the United States forgave $358 million that Liberia, a West African country emerging from civil war, owed the country and pushed for further action at the IMF-World Bank meetings. Liberia’s inherited debt to international institutions totals $1.6 billion, including $740 million to the IMF. Its total international debt is $3.7 billion.
The World Bank should further strengthen its work as a knowledge broker on development policy while continuing its existing lending activities, its Development Committee said.
Countries that are bank clients, the committee said, should sharpen their focus on poverty reduction strategies “on stronger, shared private-sector led growth to link these strategies better to budgetary frameworks and to implement them effectively.”
The bank also should help developing countries deal with the causes and impacts of climate change.
The members of the committee welcomed the commitment by the bank’s new president, Robert Zoellick to develop a new strategy for the bank in consultation with the banks’s 24-member executive board.
Zoellick, who took over as head of the bank July 1, has called on the United States and other developed countries to “translate their words from summit declarations into serious numbers” and contribute to the bank branch that makes low interest loans to poor countries. He hopes to raise $33 billion by early 2008.
He said South Africa had already set a good standard by pledging a 30 percent boost in its contribution to the loan facility.
Zoellick faces a stiff challenge because in recent years wealthier countries have preferred to channel their aid to poor countries directly through their development agencies or through foundations that specialize on an issue such as malaria.
U.S. Treasury Secretary Henry Paulson said the World Bank would have to become more efficient and demand more flexibility from its staff.
“Too often the bank group has been slow in redeploying its resources and has deployed the wrong mix of resources at the expense of poor execution on high priority projects,” he said. Paulson also said the bank needs more budget discipline.
South African Finance Minister Trevor Manuel welcomed Zoellick’s emphasis on helping to overcome poverty and promote sustainable growth in poor countries, particularly those in sub-Saharan Africa.
He said the strategic objectives Zoellick has outlined in his first 100 days in office “suggests a new pragmatism at the bank that could be of real benefit to countries in our constituency.
Germany’s minister for economic cooperation and development, Heidemarie Wieczorek-Zeul said it was encouraging, despite the turbulence in financial markets, that most countries in sub-Saharan Africa “are experiencing the highest rates of growth since their independence and a further increase in their growth rates is projected.”
“Here, it is crucial that the poor can have a share in this process, too,” she said.
Based in Washington, the 185-nation World Bank lends $24 billion (euro16.8 billion) a year for projects in the developing world such as building roads, schools and health clinic. But its role as a lender has been declining as middle income countries have access to financing from other sources.
Zoellick a former U.S. deputy secretary of state, trade representative and investment banker took over from Paul Wolfowitz, a former deputy defense secretary, who resigned in May in an ethics scandal.
Zoellick has been trying to “calm the waters” that were stirred by differences Wolfowitz had with some of the member governments and the bank staff. A new strategy he has outlined would have the bank combat poverty, especially in Africa, help aid countries emerging from wars, and promote regional cooperation to combat disease and climate change.