CUTBACKS AT WORLD BANK. International lending hits choppy water as bank reorganizes

Economist Geoffrey Bell dreamed one night that Paul Volcker was president of the World Bank, turning around the third-world debt situation, the same way he tamed inflation at the helm of the Federal Reserve Board. Then Mr. Bell woke up.

In reality, the World Bank, where the mission is to raise the living standards in developing countries, is caught up in a reorganization that is like a bad dream for many staff members. The employees have filed a formal complaint to an international tribunal about the bank's management, which intends to reduce the staff of 6,000 by as many as 600. On Friday, the first phase of the reorganization ended.

The regrouping was initiated by World Bank President Barber Conable, a former congressman from New York, who was appointed by President Reagan a year ago. A few days before Mr. Conable took office, five of the major shareholders refused to pay their part of the annual administrative budget until $7 million in fat had been trimmed from the organization's $697 million budget.

To accomplish this, Conable first reshuffled top management. Then, he began a controversial job review process. Every employee lower than a vice-president had to reapply for their job. After review about 90 percent were expected to have their applications accepted. The other 10 percent would be put into a second pool which could result in reassignment anywhere within the bank. Only 5 percent of those would be chosen and whoever was left would be retired or fired.

The reorganization has resulted in such uncertainty that employees stick close to their desks for fear the drawers will be emptied out while they are travelling to supervise a project. But the bank now estimates it is underspending its revised budget by $15 million.

Fritz Leutwiler, the former chairman of the Bank for International Settlements, believes the bank is too busy with its own problems to help with the international debt problem. ``They have too many internal problems,'' says Mr. Leutwiler, who is now the chairman of Brown-Bovari, a $7 billion Swiss manufacturing company.

``It's a pity at this point in history the bank is preoccupied with itself,'' says Richard Debs, chairman of the Group of Thirty, an international organization which studies world economic problems.

Mr. Debs believes the official agencies, led by the World Bank, should be stepping in to fill a lending void left by the commercial banks. ``We can't sit around waiting for the commercial banks to complete debt-to-equity swaps,'' says Debs, who just retired as the president of Morgan Stanley International Inc. in New York. (In debt-for-equity swaps, banks exchange debt owed them for shares in the businesses or projects they are funding. These shares may be marketable securities.) Instead, Debs says the World Bank should be seeking a capital increase to make more loans.

``We support Conable fully,'' says a spokesman for the United States Treasury. Yes, the Treasury has some problems with the reorganization, he says. But this mainly involves getting more Americans to work in the operations department of the bank.

The Treasury spokesman, who did not wish to be identified, points out the World Bank has not fully lent out the $13 billion to $17 billion budgeted for this fiscal year. ``If they need more money, we'll look at it [when more capital is needed],'' he says.

Conable himself maintains the Bank does not need such an increase. In May, at a press conference, he said, ``nothing is locked up now that is causing severe problems.''

Congress, however, which must approve any additional capital increase, is late authorizing and appropriating its $3 billion share for the International Development Authority, an arm of the World Bank.

Instead, in the pending trade bill, it has added restrictions to the World Bank's lending, mandating that no new loans could be made for mining or agricultural projects that could compete against US companies. It's uncertain if these provisions, which are opposed by the administration, will make it into the final bill.

It is unlikely Mr. Bell's dream will come true. Mr. Volcker turned down the job earlier and the administration believes Conable is doing a good job given his difficult mandate. Still, an employee of the bank admits, if Volcker were president, he would get Congress's ``serious attention much quicker.''