Slimmed-down World Bank plots strategy against global poverty

World Bank president Barber Conable has ambitious goals: Eliminate the worst aspects of absolute poverty for some 500 million Asians by the year 2000.

Mobilize an extra $1.5 billion per year of foreign financing for the 15 highly indebted, low-income countries in Africa.

Restore the major debtor countries, such as Brazil, Mexico, and Argentina, to full credit worthiness within five to seven years.

In describing his agenda for the World Bank yesterday, the former United States congressman was clearly trying to put behind him the controversial and comprehensive reorganization of the 151-nation lending agency.

That change - involving a staff cuts of about 600 people, job shifts for hundreds more, generous early-retirement packages for many others, and a shuffle of some departmental functions - left the bank stagnating for some months.

``No undertaking of this magnitude could be accomplished without some pain,'' admitted Mr. Conable yesterday at the opening of the joint annual meeting of the World Bank and its sister institution, the International Monetary Fund.

The World Bank has been left with a younger staff, while former staff members feel few restraints in making critical remarks to the press. Management professors will undoubtedly study and debate the merits of the radical shake-up for years.

Conable, however, appears to have the basic support of those who count - US Treasury Secretary James Baker III and some other finance ministers of key industrial nations.

Indeed, Mr. Baker last week pledged US support for an increase in the capital of the bank. Discussions are under way among the bank's governors regarding the size and details of the increase. The capital increase is expected to end up between $60 billion and $80 billion, almost doubling the bank's capital. This will let the institution continue and expand its loans to the world's poorer nations into the 1990s.

One important question is how much of the capital increase member nations would pay in cash and how much would be provided ``on call'' should the bank have trouble obtaining repayment of major loans.

Paid-in capital must be provided out of national budgets. Given the tight budget in the US and some other industrial nations, paid-in capital is likely to be only 7.5 percent or less of the total, and may be provided over several years.

That capital serves as the financial base for World Bank bond issues, which raised $11 billion in the current fiscal year. Because of the indirect backing of the key treasuries of the world, the World Bank can obtain favorable interest rates on its bonds. This advantage is passed on in relatively low charges on its loans to developing nations.

President Reagan, who also addressed the international bankers, called for stepped up lending by multinational banks and commercial institutions to assist indebted third-world nations, saying a cooperative approach by both prosperous and poor nations ``is the only real answer'' to the red-ink problem.

``The huge debt burden carried in the third world is not just their problem,'' Mr. Reagan said. ``It is our problem.''

In his address, Conable outlined his agenda for the bank, the world's largest provider of development money. The bank expects to lend $14 billion to $15.5 billion in the year ending in mid-1988. An affiliate, the International Development Association, will lend an additional $3.4 billion or so to the poorest nations at extremely easy terms.

Conable dealt with popular criticisms of the bank by promising to promote free enterprise and take account of environmental concerns in its operations.

``Only by defending nature can we ensure the survival of man,'' he said.

In talking about the financial needs of the major debtor nations, he set an objective of a 2 percent per capita growth rate as a key element in national economic programs aimed at enabling them to better service their debts. He pledged bank support for these programs with ``substantial new lending.''

Conable also said the bank would work with governments to expand ``innovative market-based approaches to the resolution of debt problems.'' Such techniques include converting debt into equity (ownership of companies) or working capital, and exit bonds (loans are converted into bonds, usually at a discount from the face value of the loans).

The bank provided four-fifths of total net lending to the 15 major debtor nations last year. That's because commercial banks were reluctant to expand their loan activity in these nations and government foreign aid has stagnated. Conable ``rededicated'' the bank to the fight against poverty, outlining in some detail plans for helping sub-Saharan Africa and the poor nations of Asia.