Awakening to False Economy

The record replenishment of money for the important work of the International Development Assn. pledged by 34 nations is a reassuring decision for the struggling nations of Africa, Latin America and Asia that will be the beneficiaries.

IDA, the soft-loan arm of the World Bank, provides long-term loans for a modest service fee to nations that have per-capita incomes of $790 or less. Under the new three-year replenishment, the eighth since IDA was established, a total of $12.4 billion will be made available, with nearly half of it going to Africa. About one-fourth of the money will be invested in programs encouraging policy reforms to accelerate development.

In this replenishment, unlike the preceding one, the United States played a more constructive role. Three years ago, inspired by then-Treasury Secretary Donald T. Regan, the United States blocked a $12-billion replenishment and insisted on a ceiling of $9 billion.

This year the United States agreed to pay its customary 25% share of an $11.5-billion replenishment, while a dozen other nations, led by Japan, made increased commitments that carried the total to its new record level.

Japan, the No. 2 donor to IDA, will be giving 21% of the total replenishment, and the U.S. share of the expanded total will be 23%. This increase in Japanese commitment will now be reflected in the World Bank itself, where the United States has proposed dropping its own voting share from 20% down to 18% to permit increases for others--notably Japan’s, from 5% up to 6.3%. The shift is contingent on a rewriting of the rules at American insistence so that the United States, despite a diminished participation, will still have veto power on policy matters.

The fulfillment of the American commitment depends now on the willingness of Congress to appropriate the money. A group in Congress that dislikes IDA, for reasons far from clear, has managed over the years to delay payments and, in the last two years, to refuse full appropriations for IDA. So the United States is more than $200 million in arrears--the only significant arrears among the donors.

Congressional support is more likely in the coming session. As the Reagan Administration has slowly awakened to the importance of the World Bank and IDA, there has been more public awareness of the shortsightedness of past budget reductions. Furthermore, there is better understanding of IDA’s particular effectiveness in addressing the problems of the poorest nations, in which bilateral aid cannot always be as effectively targeted and controlled.