April 20, 2004
Washington: A debt relief program for the world’s poorest countries is facing a $7.8 billion funding shortfall, mostly from the World Bank, a U.S. Congressional watchdog told lawmakers on Tuesday.
And the gap may be even higher because data for Laos, Liberia, Somalia and Sudan are unreliable, the General Accounting Office said.
“The three key (development banks) we analyzed face a funding shortfall of $7.8 billion,” Thomas Melito, acting director of International Affairs and Trade at the GAO told a House of Representatives Financial Service Subcommittee.
“The World Bank and African Development Bank have not determined how they would close this gap,” he added.
The World Bank needs to find an extra $6 billion, the African Development Bank needs $1.2 billion and the Inter-American Development Bank is finding the money by reducing its future lending resources to poor countries by $600 million.
At current projections, the International Monetary Fund has enough money to fully fund its commitments to the program, Melito said.
The initiative was created in 1996 to alleviate the problem of unsustainable debt in some of the world’s poorest countries. Governments, in exchange for the pardon of a portion of their debt, have to stick to an economic program put together with the help of the IMF.
Twenty seven countries out of a possible 38 have begun receiving debt relief under the initiative.
But the GAO said that even if donors find the money to pay for the current plans, the 27 countries are likely to need more than $375 billion in extra help from donors to meet the economic growth and debt relief targets by 2020.
This is because the World Bank and IMF’s export earnings projections for the countries are too rosy.
“We estimate that export earnings are more likely to grow at the historical annual average of 3.1 percent per year – less than half the rate the World Bank and IMF project,” the GAO said.