Dutch Split On World Bank Grant Plan
WorldNews.com, Thu 9 Aug 2001

World Bank News Roundup.

A call by the US to turn some World Bank loans to very poor countries into grants drew a mixed reaction from Dutch aid groups yesterday, reports Het Financieele Dagblad (The Netherlands). "Switching from loans to grants at the World Bank's IDA arm (which lends funds to very poor countries) is extremely risky. If it is not coupled with a structural increase in contributions, it would mean the IDA cash reserves would dry up in the long run," said Greetje Lubbi, director of aid group Novib.

IDA partly relies on interest paid on existing loans, she pointed out. Without extra money flowing, the financing of the IDA was threatened.

However, others criticized the idea of repayable loans. "Grants to the poorest countries are better because loans put a burden on future generations," said Jos de Voogd of Cordaid. And Pol de Greve, project manager at Foster Parents Plan Nederland, insisted that the burden of debt braked development and the fight against poverty. "As a result, vital investments, in particular in healthcare and education, are hit," he said, adding that therefore, Foster Parents Plan backed canceling debts held by the least developed countries altogether.

The US stance has triggered a heated debate among World Bank contributors, notes the story. A Foreign Ministry spokeswoman said yesterday The Netherlands was among those countries that opposed distributing more grants and was preparing a reaction with like-minded countries. "We are not alone in our opinion," she said. Austria, Denmark, the UK and Finland are also known to oppose the idea.

"The US call for a shift towards more grants is highly suspicious. It is known as a poor donor country," Novib's Lubbi said meanwhile. "The US has not indicated that it plans to increase its contributions. I can imagine that European governments are highly skeptical about it."

The World Bank has said that it supported the idea of increased grants in principle and is investigating the feasibility of it, the story notes.

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