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World Bank Says Post May Ease Crisis : Official Will Advise Debtor Nations on Managing Finances

May 11, 1987|From Reuters

WASHINGTON — The decision to establish a new position at the World Bank to assist debtor countries in their financial management activities marks a new step in handling the global debt crisis, officials said.

World Bank President Barber B. Conable Jr., named by President Reagan 10 months ago to head the institution, announced the new position last week during an unveiling of a reorganization of the institution.

He said the job had been offered to bank Treasurer Eugene Rotberg but that the executive, who currently manages the bank's $20-billion portfolio and financing activities, had not yet decided to accept it.

Rotberg, considered by officials as an economic powerhouse who has shown skill and excellent timing in handling bank finances, has always been interested in a position that would allow him to guide debt-burdened developing countries in handling financial management, officials said. Rotberg was not available for comment.

Conable, speaking with reporters, made it clear that the position would be filled by someone else if Rotberg declines.

"I think this suggests that the World Bank has decided to take an even greater role in managing the debt strategy," one World Bank source said.

Primarily, the bank lends money to developing countries to assist in the building of basic infrastructure, such as dams, roads and sewers.

In recent years, however, the bank increasingly has been making loans to assist economic reform to help countries change their approaches to dealing with basic economic strategies in the light of the debt problem.

Specifically, the new position, called vice president for financial intermediation, would counsel developing countries on how to most efficiently manage limited financial resources.

Officials and sources said Third World countries had in the past sought advice from the bank and had been impressed by how well the bank's own portfolio had been managed.

Sells Securities

The World Bank finances its assistance to developing countries by selling securities through direct placement with official sources, such as governments, government institutions and central banks and in the private sector.

The bank said of the 98 medium- and long-term borrowing operations conducted last year, 84 were in the private sector throughout the world and accounted for $8.5 billion, or 80% of its borrowing.

At the same time, the bank has a liquid asset portfolio of about $20 billion. The agency uses it to assure flexibility in its borrowing decisions and to permit it to meet its cash requirements in case borrowings are temporarily affected by adverse market conditions. The bank said it earned $2.1 billion from these activities last year.

As envisioned by bank management, the agency's investment skills and techniques could be offered to the financial managers of countries, although officials said it is not planned that the bank would handle their investments directly.

"Funds could be moved in and out of various investments, ranging from currencies to equities, in an attempt to get the best possible return on their reserves," a bank official said.

In addition, the bank could guide countries in getting more involved in co-financing opportunities, where they could cooperate more directly with other investors in assisting their economies, he added.

Investment managers, of course, are not hard to find in the private sector, and many countries use their services.

But officials said the bank's role would be more profound. The bank is considered a friend of the developing world and is generally trusted, they said.

The new position could help the bank in its role of assisting countries to come to grips with the debt crisis, allowing loans to assist reform to be viewed against growing investment skills, sources said.

"The debt crisis will be around for some time," said one monetary source, and "the bank wants to be part of its cure."

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