World Bank to Double Contribution to Loan Plan

To cover a shortfall in money promised by the United States, the World Bank plans to double its contribution to the agency that grants loans to the poorest countries.

The decision coincided with the bank’s announcement Friday of a 12% drop in profit for the 12 months ended June 30. It attributed the decline in net income from $1.354 billion to $1.187 billion to generally lower global interest rates cutting into earnings of the bank’s investment portfolios.

The recommendation to increase to $600 million the World Bank contribution to the International Development Assn. came from representatives of the 180 member countries, including the United States, on the bank’s executive board. They said U.S. arrears forced the move.

The United States has long been the biggest contributor to IDA, the World Bank agency that lends to the poorest countries on easy terms. Washington has fallen behind in its contributions in recent years, however, and President Clinton’s request for $935 million to pay off the arrears has not survived congressional scrutiny. Both houses of Congress have voted to cut the amount, but they have not agreed on the size of the cut.

Money for the increased World Bank contribution would come from last year’s earnings and $710 million remaining from earlier profits. The bank keeps $3.3 billion on hand to cover any losses.

A final decision on the increase proposal is due in October.

The bank’s board also voted this week to put aside $500 million to reduce the debt of some of the poorest countries. It said the money will be available when some more affluent governments are ready to join in a reduction plan.

Almost 80 countries will be eligible for loans from the International Development Assn. because their people’s incomes average $865 or less a year. The countries will have 40 years to repay the loans, and the annual interest will be less than 1%.