World Bank pledges record 3.5 bln dlrs to aid poorest nations

from Yahoo News

WASHINGTON (AFP) - The World Bank on Thursday pledged a record 3.5 billion dollars to aid the world's poorest countries as it cut the interest rate on loans to big developing countries.

The lowering of loan rates was a concession by the World Bank as it stepped up efforts to get some of the big borrowers such as China and Brazil to contribute to poverty-fighting efforts.

The bank said it was seeking to contribute more than double the 1.5 billion dollars it had pledged two years ago to the International Development Association (IDA), its arm which provides interest-free loans and grants to the poorest countries.

"By boosting its IDA pledge by over 100 percent, the World Bank Group is putting its money where its mouth is," said Robert Zoellick, the World Bank president.

"This should help us gain momentum as we urge donor countries to increase their commitment to help the 81 poorest countries, especially in Africa, through an ambitious IDA 15 replenishment," he said.

Zoellick cited the example of South Africa, which had already pledged an increase of over 30 percent to support IDA.

The World Bank said its board of executive directors also took "a second important step" Thursday, approving the biggest simplification and reduction in loan charges in nine years for the 79 creditworthy low-and middle-income countries that are clients and shareholders of IBRD.

The reduction takes the controversial loan rates to levels last seen in 1998, before rates were raised in the aftermath of the Asian financial crisis.

In a teleconference with reporters, Zoellick said the World Bank executive board had decided to lower by about a quarter percentage point the rate it charges.

"A number of middle-income countries have been raising this issue almost seven, eight, nine years," he said.

The World Bank highlighted that, for the first time, the amount pledged to IDA is also being funded "substantially" from the income of the International Finance Corporation (IFC).

The IFC is a World Bank affiliate that promotes private-sector development through investment and advisory services. The Bank said it plans to expand private-sector investments in developing countries.

The goal of 3.5 billion dollars is expected to be contributed equally by IFC and the International Bank for Reconstruction and Development (IBRD), another World Bank affiliate.

About 39 of the 81 countries eligible for IDA assistance are in Africa, and the number of poor in the region has doubled over the past two decades, the World Bank said.

The talks for the fundraising campaign, known as IDA 15, began in March and are expected to conclude in December.