WB pledges record $3.5b to aid poorest nations

The World Bank on Thursday pledged a record 3.5 billion dollars to aid the world's poorest countries as it cut the interest rate on loans to big developing countries.
The roughly quarter-point lowering of loan rates was a concession by the World Bank as it stepped up efforts to get some of its bigger borrowers such as China and Brazil to contribute themselves to poverty-fighting programs around the world.
The compromise marks a major coup for the new president of the troubled bank, Robert Zoellick, a former US trade chief who took office in July after the ouster of Paul Wolfowitz over a favoritism scandal.
Known as a sharp negotiator, Zoellick, who left the Wall Street investment bank Goldman Sachs to join the World Bank, apparently managed to quickly strike a win-win deal to find more money for poor countries and ease borrowing for middle-income clients.
The bank said Thursday it was seeking to contribute more than double the 1.5 billion dollars it had pledged two years ago to the International Development Association (IDA), its arm which provides interest-free loans and grants to the poorest countries.
"By boosting its IDA pledge by over 100 percent, the World Bank Group is putting its money where its mouth is," Zoellick said.
"This should help us gain momentum as we urge donor countries to increase their commitment to help the 81 poorest countries, especially in Africa," he said in a statement.
Zoellick cited the example of South Africa, which had already pledged an increase of over 30 percent in its support for IDA.
The bank said its board of executive directors also took "a second important step" Thursday: approval of the biggest simplification and reduction in loan charges in nine years for the International Bank for Reconstruction and Development (IBRD), another key World Bank lending loan unit.
The move affects 79 creditworthy low- and middle-income country borrowers and shareholders of the IBRD, and takes the controversial loan rates to levels last seen in 1998, before rates were raised in the aftermath of the Asian financial crisis.
In a teleconference with reporters, Zoellick said the World Bank executive board had decided to cut by about a quarter percentage point the rate the IBRD charges.
"A number of middle-income countries have been raising this issue almost seven, eight, nine years," he said.
Since the Asian crisis, a number of middle-income countries have amassed large foreign currency reserves and no longer see the need for significant financial support from IBRD.
The current talks for the fundraising campaign for the group of poorest countries began in March and are expected to conclude in December.
The previous IDA campaign raised 33 billion dollars in total from donor countries and the World Bank.
Donor countries are asked every three years to replenish IDA coffers and review its policies.
"I am very pleased that the board has agreed to help us put our money where our mouth is in terms of trying to get donors to support IDA," Zoellick said.
About 39 of the 81 countries eligible for IDA assistance are in Africa, and the number of poor in the region has doubled over the past two decades, the Bank said.
For the first time, it said, the amount pledged to IDA is also being funded "substantially" from the income of the International Finance Corporation (IFC).
The IFC is a World Bank affiliate that promotes private-sector development through investment and advisory services. The bank said it plans to expand private-sector investments in developing countries.
The 3.5 billion dollars is expected to be contributed equally by IFC and the IBRD.