Debt Relief Plan To Prove A Drain On Ida Kitty

World Bank officials, who were effusive about the success in putting together fresh pledges for the IDA-11 earlier this year, are now publicly beginning to sound uneasy about the facility's ability to meet all future needs.

IDA faces a serious problem: it's not certain whether it can scrape together the funds necessary to do its job, World bank president James D.Wolfensohn said earlier this week.

Although IDA is committed to lend $ 22 billion over the next three years, new pledges amount to only half that amount. The rest will come from the World Bank, repayments, and past contributions.

In real terms, the IDA-11 agreement is a significant drop in commitments from the preceding years, leaving open the possibility that it may be insufficient to cope with any extra demands. The agreement is fragile, Wolfensohn noted dryly while addressing the annual meetings.

 

The Development Committee, focusing on the problem, called on members and donors to work together to stave off potential financing troubles, by working on adequate and secure funding for IDA.

It might be an uphill task. The United States, traditionally a leading IDA donor, now owes the facility promised funding. US officials point out that Congress is inclined to approve just $ 700 million of an estimated $ 934 million in arrears. Even that is being held up until next March.

Future US funding, meanwhile, is likely to be jeopardised by the decision to exclude American firms for bidding for contracts under a special one-year interim trust fund. The procurement will be restricted to donor nations, an argument that is highly unpopular with American lawmakers.

Warned US treasury secretary Robert Rubin, The restrictions are counterproductive. As the largest IDA borrower, the uncertainty over future financing for the facility clearly has major implications for India. Last year, the country received $ 1.3 billion in IDA credit.