Multilateral Development Banks

First the mutiny, then the silver

The Economist
December 19, 2007

In the wake of a staff mutiny against former World Bank president Paul Wolfowitz, the U.K. edition of The Economist notes that the lending giant’s new head, Robert Zoellick, has raised a windfall in support from rich countries.

Zoellick has raised more than $25 million from 45 countries in its latest “beg-a-thon,” all the more remarkable because it comes on top of $6.3 billion to compensate the Bank for loan repayments it lost after issuing debt relief to its own Third World borrowers. (See earlier coverage)

While the Bank may be basking in the warmth of cash flow through its coffers, to the governments and projects it supports, The Economist cautions that development is sometimes “better served by restraint than by largesse.” Free money, it says, “can stifle a country’s own tax-raising efforts – and private enterprise. It can also underwrite misgovernment and malfeasance. The bank’s staff and shareholders balked when Mr. Wolfowitz shifted course to focus more on corruption. After that experience, will their new helmsman ever dare to rock the boat?”

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