World Bank Taps Funds, Cuts Staff After Budget Woes

The World Bank, which presses countries from Argentina to Zambia to get their budgets under control, is being forced to take some of its own advice.

The global lender has had to draw on a $40-million contingency fund and is firing up to 300 people after a spending spree late last fiscal year by some departments that mistakenly thought they had extra money.

The departments, handling regions such as Latin America and Africa, finished the year $26.7 million over budget--just as the lender was pledging to cut back on spending, officials said.

The budget reductions it now has to make will “require some difficult reforms and require some tough choices,” said Merrell Tuck, a World Bank spokeswoman, echoing counsel that the Washington-based lender often gives to borrowing countries.

The bank had cut more than 500 jobs during the last few years as it struggled to fulfill a pledge by President James Wolfensohn to return to 1997 spending levels by this fiscal year.

The lender’s woes come as the bank is making improved budgeting and more transparent use of public funds the cornerstone of its loan programs to dozens of countries.

The bank lent $15.3 billion last year to developing nations, often attaching conditions that governments balance budgets, sell state-owned assets or make regulations more conducive to encouraging foreign investment.

Lending this year will be $15 billion to $18 billion, Wolfensohn has said.