The World Bank and the International Monetary Fund open their annual meetings in Singapore Tuesday. At the top of the agenda for two days of talks among the world's finance ministers are debt relief and corruption in the aid process.
Finance officials attending preliminary meetings Monday backed a World Bank plan to tackle corruption. But they decided that any moves to withhold aid because of corruption in the recipient nation would require oversight of the bank's executive board, in order to ensure that such decisions are broadly based.
World Bank President had earlier been criticized for blocking hundreds of millions of dollars in loans to African and Asian nations last year because of allegations of corruption.
Wolfowitz said Monday the bank's moves to crack down on corruption in countries receiving World Bank aid was necessary for poverty reduction.
"It's about making certain that the money goes to schools and textbooks for children, medicine for mothers and creating job opportunities for the poor, not to line the pockets of the rich and powerful," he said.
The move to fight corruption in the aid process is being backed by the Bush administration, and has considerable international support. But some countries and activist organizations have expressed concern that the fight against corruption is slowing loans to the poor.
Finance ministers also expressed concern Monday that debt relief was not reaching poor countries fast enough, and that new debts were beginning to pile up, even in countries whose debts had been cancelled by donors.
A small group of debt-relief activists demonstrated near the entrance of the meeting venue Monday, demanding that international financial institutions remove what they say are excessive conditions attached to debt relief.
Activist organizations say bank demands for privatizing and restructuring certain industries and liberalizing trade are obstructing poor countries' escape from poverty.
Finance ministers representing the world's poorest countries also said the World Bank and IMF should be more flexible with conditions they attach to debt relief.
But bank officials and finance ministers have expressed concern at commercial lenders moving in to provide new loans to countries that are unable to meet World Bank conditions, or have recently had their debts forgiven.
U.S. Treasury Secretary Henry Paulson said Monday that there are already signs that excessive lending to countries struggling to get out of debt is trapping them in new debt, prolonging the cycle of poverty.
Wolfowitz said World Bank loans reached a record high in the last year. The International Financial Corporation, the private sector arm of the World Bank, says investments and loans to high-risk and low-income countries were up 20 percent, with a record $9.5 billion committed for investment in private-sector social projects in developing countries.