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World Bank Loans to Middle Income Countries Remain Controversal


The Washington-based World Bank Thursday said its lending to middle income developing countries over the past decade has been helpful in alleviating poverty and promoting economic growth. VOA's Barry Wood reports that a noted bank critic disagrees.

In the past decade, 66 percent of World Bank lending, some $163 billion, has gone to 86 so-called middle-income countries. This disparate group includes China, Russia, Turkey and Brazil, countries where per-capita incomes range from $1,000 to $10,000 per year. Vinod Thomas, the head of the Bank's evaluation unit, says the Bank should continue to lend to middle-income countries.

"This group has raised average incomes - per capita incomes - by four percent in the last decade, which is almost twice the increase of high-income countries," said Vinod Thomas.

But a growing number of critics say the World Bank should concentrate its lending not on successful middle-income countries but on the poorest countries, which are mainly in Africa. Adam Lerrick is a former investment banker now a professor at Carnegie Mellon University in Pittsburgh.

"There's no justification whatever for the Bank to continue to lend to these [middle-income] countries," said Lerrick. "These countries have easy access to the capital markets, private capital. There's no project in these countries that the Bank would fund that the private sector would not be willing to fund."

The Bank's evaluation unit disagrees, saying that even though several middle income countries have moved up the income ladder, they still have millions of poor people who need World Bank assistance. In defending its record, the Bank says that 400 million people in middle-income countries, 70 percent of them in China-have emerged from poverty in the past decade.

But Adam Lerrick says Bank lending has not been a major factor in China, India and Indonesia-the great anti-poverty success stories.

"In those countries [China, India, Indonesia], the Bank has had minimal if any role in the progress those countries have made," he said. "These countries have developed sound economic policies and grown their way out of poverty."

Thomas O'Brien is the principal author of the Bank's report. He says that the in the years ahead the Bank needs to be more flexible in its assistance programs. He concedes that bank operations have had little positive effect in overcoming corruption in borrower countries.

"The best indicators we have about levels of corruption and control of corruption don't show much across the board positive movement," said O'Brien.

The World Bank has been afflicted by considerable turmoil in recent months as its former president, Paul Wolfowitz, was forced to resign. Its new president, respected former U.S. diplomat Robert Zoellick, has promised a full review of Bank operations.