Congress gives some love to the World Bank

Gridlock is the new norm on Capitol Hill, and a Republican Congress is none too friendly to international organizations and foreign aid. So in this harsh environment what would be the prospects of getting appropriators to pony up millions in new funds for the World Bank?

Remarkably, that is just what happened in December. With relatively little public attention, Congress approved all the funds the administration had asked for to boost the World Bank's lending power -- about $800 million over five years -- and agreed to top up the Bank's fund for the poorest countries, the International Development Association (IDA). Congress also threw in most of the requested funds for the Inter-American Development Bank, the African Development Bank, the European Bank for Reconstruction and Development, the Global Agriculture and Food Security Program, and a climate and environmental fund administered by the World Bank.

Lael Brainard, Undersecretary of the Treasury for International Affairs, told me that the administration's request was unprecedented:

This is the first time in history that we have asked for capital increases for every single one of the development banks all at once…At the same time, we had a large increase in the IDA and the African Development Fund, which reach the poorest. We were very pleased with the strong show of support from Congress for these institutions across the board. It was really remarkable, and it was bipartisan.

According to sources near the negotiations, World Bank and Treasury Department officials provided dozens of briefings to key members of Congress over the past year, explaining in detail the Bank's activities and making the case for why the institution needed a general capital increase, the first since the late-1980s. Bank president and Washington veteran Robert Zoellick was reportedly a tireless interlocutor. As a former senior Bush administration official, Zoellick has strong credibility with Congressional Republicans.

In explaining the Bank's activities, the Treasury Department laid particular emphasis on the work of the institution in places where the U.S. has deployed forces. "What really carried the day was the fact that the multilateral development banks advance our national security and are doing a lot of the tough work that helps safeguard the enormous investments our troops have made in stabilizing countries from Afghanistan to places where natural disasters strike like Haiti," said Brainard.

But it appears that the most powerful argument for the appropriation may have been less the Bank's good work and more the necessity of preserving U.S. privileges in the institution. It was clear to legislators that if the United States failed to help fund a capital increase supported by other Bank members, the United States would dip below the critical 15 percent voting share that gives it a veto over key Bank decisions.

"At the end of the day, that was the argument that made the difference. Losing the voting share resonated most," said one source close to the negotiations.

The Multilateralist

How the BRICs help the poorest

World Bank chief economist Justin Yifu Lin notes that the poorest countries have weathered the economic turmoil of the past several years remarkably well. And part of the credit, he and other Bank economists argue, goes to the BRICs:

One of the reasons appears to be that these low income countries have benefitted from strong spillovers from emerging market and other developing economies, particularly BRIC countries. Some would argue that [low income countries] have been less affected by the global financial crisis because they are less integrated with the world economy.  However, it should be noted that this lower degree of integration did not prevent low income countries from suffering sharp declines in economic activity in the past. Of course, improvements in macroeconomic management in recent years and strong international support helped mitigate the impact of the crisis, but it seems there is little doubt that low income countries' ever-increasing linkages with BRICs provided significant support to their growth during the crisis.