WASHINGTON (Reuters) - The Senate has ordered a congressional watchdog to investigate whether World Bank programs are effective in fighting poverty in developing countries, Senator Evan Bayh said on Friday.
The Senate on Thursday unanimously backed an amendment by Bayh, a Democrat from Indiana, that instructs the Government Accountability Office to assess development projects financed by the World Bank’s fund for poor countries.
The bank’s International Development Association, or IDA, provides interest-free loans to its poorest borrowers, which requires countries like the United States to restock the fund every three years. Year-long negotiations are currently under way to replenish IDA funds.
The Government Accountability Office probe will also focus on the bank’s efforts to fight corruption and whether its mechanisms to measure how effective its program are in fighting poverty are adequate.
“There is a real question as to whether the bank, as currently constituted, is an effective instrument for alleviating poverty,” Bayh said in a statement.
“Bank officials are too willing to accept corruption as just another cost of doing business in certain countries.”
In addition, the investigation will review the World Bank’s lending to rapidly emerging economies like China, India, Russia and Brazil. Some U.S. lawmakers strongly believe the bank should stop financing development programs in these countries that can easily raise money on global markets.
“The vast majority of World Bank lending is in countries that no longer need the bank for development finance,” Bayh said.
“Bank leaders are evaluating success based on the volume of loans approved versus the effectiveness of the loans in alleviating poverty. This study could help produce a road map for beneficial reform.”
Bayh said the amendment also expressed the Senate’s concern that many senior World Bank employees enjoy excessive compensation and benefits and that thousands of bank consultants have annual incomes similar to, or greater than, the incomes of senior staff.
Bayh said there was also concern over the bank’s procurement procedures for projects funded by the lender.
U.S. business groups have complained that the World Bank is moving toward adopting a system of bidding rules for projects developed by countries, which would undermine transparency and lead to corruption.
In 2005 the Senate passed legislation threatening to withhold 20 percent of international development aid funding if the World Bank adopted less stringent procurement systems, Bayh added.