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Baker Warns World Bank of Snag : Congress May Balk at More Funding, Treasury Chief Says

September 29, 1987|Associated Press

WASHINGTON — Treasury Secretary James A. Baker III told the World Bank on Monday that persuading Congress to support a major increase in the bank's lending "will not be an easy issue."

But Baker said the Reagan Administration is "committed to press for these funds," which he called necessary for the 151-nation organization's "continued efficient operation."

Barber B. Conable Jr., World Bank president, is seeking an increase in capital to support a boost in bank lending to underdeveloped nations, mostly in Latin America and Africa, in the range of $40 billion to $80 billion. The increase would be shared among industrialized nations.

Capital used to support the bank's lending now stands at $94 billion, roughly 20% of it pledged by the United States. The proposed boost comes as private lending to the Third World has all but dried up in the face of an accumulated debt of $1.1 trillion and actions by some countries, including Brazil, to suspend payments.

The bank writes about $17 billion each year in new loans to developing nations. Conable wants this increased to $20 billion a year by the 1990s.

The Reagan Administration last week withdrew its original objections to the proposed increase and said negotiations should begin after this week's meeting of the World Bank and its sister organization, the International Monetary Fund.

"We anticipate that this will not be an easy issue to present to our Congress," Baker told the Development Committee, the IMF-World Bank panel that oversees such loans. There has been considerable resistance in Congress to increasing funds for international lending organizations at a time of budget austerity. Conservatives have also been increasingly vocal in their criticism of loans by the groups to underdeveloped communist nations.

Baker has not disclosed how much larger a contribution the United States would have to put up under the new plan, because the ratio of direct payments to funds placed on reserve has yet to be determined.

Under an existing formula, the United States puts up only $7.50 for each $100 that it pledges to support World Bank loans. With that breakdown, the increased U.S. contribution would range from a total of about $700 million to about $1.5 billion.

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