Cheap Shot

Cutting loans for poor nations

The U.S. reputation for international openhandedness has faded a bit more.

At a rancorous three-day meeting in Washington earlier this month, the World Bank's 33 wealthiest member nations agreed to donate only $9 billion over the next three years to the International Development Association (IDA), an agency of the bank that makes interest-free loans to more than 40 of the world's poorest nations. The amount, which represents a reduction of 25% from 1983 levels, is $7 billion less than the $16 billion requested by the bank's management.

Most donor nations supported a $12 billion compromise budget, but it fell through because the Reagan Administration trimmed the annual U.S. contribution from nearly $1 billion to $750 million. The other members were then left with a hard choice: increase their own donations to get the total up to $12 billion, which would have dropped the U.S. share below 25%, violating an informal agreement reached last year, or lower the budget total to keep the American donation at 25%. In the end, the nations decided it was more important, as a matter of precedent, to keep the U.S. shouldering a quarter of the burden, and so they lowered their contributions accordingly.

President Reagan settled on the $750 million figure in early December, over the objections of Secretary of State George Shultz, who advocated a $950 million annual contribution. Reagan cited congressional reluctance to contribute more than $750 million a year. But his rationale did not mollify World Bank President A.W Clausen, an American. Said he: "I've always believed the President of the U.S.

can get anything he really wants."

Shortly after Reagan took office, the U.S. Treasury Department conducted a study of multilateral lending institutions.

The report challenged criticism that the IDA was, as Republican Congressman Mickey Edwards of Oklahoma had put it, "a giant worldwide welfare program." But it nonetheless recommended that the U.S.

cut back on its IDA contributions. If credit-worthy beneficiaries like India (which now gets one-third of the IDA'S largesse) and China were forced to borrow at the bank's subsidized interest rates, according to the report, the poorer countries could receive higher levels of aid. To qualify for the grants, which, technically, must be repaid within 50 years, a country must have a per capita income of less than $800.

The cutback drew fire both internationally and at home. Said Sven Burmester, a World Bank expert on sub-Sahara Africa: "This means that people will starve." Declared C. Fred Bergsten, director of the Institute for International Economics, a Washington-based think tank:

"It is shortsighted in terms of the United States' own economic interests and the world economy."