Why US is playing tough with World Bank
To many leaders in the developing countries, Beryl Sprinkel is a skinflint. The undersecretary for monetary affairs in the Treasury is regarded as overly eager to keep down US contributions to the World Bank and the International Monetary Fund (IMF).
In an interview, Mr. Sprinkel explained why the United States took a ''tough guy'' role at the recent joint annual meetings here of the bank and fund and will continue to do so.
''The basic reason is cost,'' he said. ''We will be the most important creditor in terms of total funds, and our Congress is not disposed, nor is the American public disposed, to spending ever-increasing amounts of money on IMF programs.''
In the case of the World Bank, the Treasury has made the lowest proposal of any industrial country for the next round of contributions to its affiliate, the International Development Association (IDA). It makes loans on easy terms to the globe's poorest nations.
''If conditions continue to improve and the Congress changes its disposition, we'll certainly consider (asking for more). But we believe that at the present time we are asking for the maximum amount.'' That is $750 million a year for three years.
Canadian Finance Minister Marc Lalonde has already sent a letter to Treasury Secretary Donald Regan complaining of the size of his administration's plan to ask Congress for $750 million a year in the next replenishment of IDA's fund, noting that it would mean a shrinking in real terms of this flow of money to the poor. And there's a move afoot to have Europe's most conservative governments do something similar to persuade the US to be more generous.
The Reagan administration's proposal would provide IDA with a total of $9 billion in money for the next and seventh replenishment of funds. The bank itself sought $16 billion. Several other donor industrial nations were suggesting $12 billion.
Mr. Sprinkel commented: ''Given the budget constraints . . . we cannot and we will not agree to a (seventh replenishment) that we cannot produce on. You know we had one big fight delivering on the prior administration's promise. . . .''
Congress stretched its contribution to IDA's sixth replenishment from an agreed three years to four years, and has yet to approve the fourth-year amount.
In regard to ''selective'' capital increase for the World Bank itself, designed to take account of shifts in the economic importance of nations, the US has also proposed the lowest amount - $3 billion instead of $20 billion proposed by the developing countries. This, for instance, would permit Japan to replace Britain as the third-largest shareholder in the bank.
The US went along with a request to the executive board to study the details for putting through a compromise $8 billion. This leads insiders to reckon that the US will go along with the $8 billion figure once it gets approval of an increased IMF quota and IDA funding through Congress.
Mr. Sprinkel, however, says $3 billion is sufficient to readjust shares. ''We do not believe that we should confuse the issue as to total funding or the size of a sustainable loan program (of the World Bank) with a selective capital increase.''
The bank's members are considering a general increase in its capital, an increase that would indirectly permit more lending by the bank to poor countries.
The bank's executive has just been asked to study the role of the institution and report back in a year. Mr. Sprinkel explained that one goal of the study would be to see if the bank can ''get more bang for the buck if we can reorder some of its investment programs.''
He continued: ''For example, the World Bank has the world's leading experts on evaluation of (development) projects. . . . They have paid less attention to questions of what kind of economic environment exists in the country where the project is being financed. Do they have an economic system that encourages savings, encourages investment, encourages work, that encourages adjustment, or do they have a rigid system. It makes little sense to spend billions of dollars through the World Bank for a particular project which on its own looks pretty good, but within the environment where it's occurring, it's certainly not going to contribute in a significant way to the growth and prosperity of that nation.''
As for the IMF, the US has also been restraint-minded in a dispute over how much money a nation can borrow to cover an international payments deficit. A compromise was reached which, within broad guidelines, will leave the question of access, or borrowing rights, up to the fund's executive board. Overall, at least the same amount of access will be available, and more where needed and justified by adequate austerity programs.
Sprinkel noted that the agreement provided for review of access each year. If conditions are right, he said, it might be appropriate for reducing what is termed ''enlarged access'' to the fund's money with the objective of getting ''back to normal'' within the next few years. Because of severe economic strains , nations have been permitted since 1981 to borrow more than their ''quota.''
Mr. Sprinkel said the US does not want the IMF to be a source of continuous financing for nations with international payments problems. They should borrow, initiate domestic programs to eliminate their payments difficulty, and then pay back. Because of low commodity prices and high interest rates, some nations have been using IMF funds for several years. But looking to the period ahead, Mr. Sprinkel wants the fund to return to its ''revolving nature.''
So those are the reasons the US has been the ''tough guy'' in the area of international finance.