- The Washington Times - Thursday, September 7, 2006

World Bank President Paul Wolfowitz doesn’t want to see poor countries whose debts are erased get back into a situation where they are sinking in red ink.

It’s a matter that is likely to be discussed at the annual meetings next week of the World Bank and the International Monetary Fund (IMF) in Singapore, Mr. Wolfowitz told reporters yesterday.

“It is a very hard problem,” Mr. Wolfowitz said. “The real problem is how to maintain debt sustainability with these countries now that some of them are in a position to borrow again.”

The World Bank and the IMF have approved plans to wipe out billions of dollars worth of debt owed to them by the world’s poorest countries, many of which are in Africa.

The action was a response to a call from leaders of the richest nations that freeing impoverished countries from crushing debt would allow them to use the money that would have gone to repaying loans to be invested in improving education, fighting disease, combating poverty and taking other measures to help citizens.

“You don’t want to get into a situation where they are highly indebted poor countries all over again,” he said.

Ways to avoid such a situation will be discussed, but a consensus hasn’t formed, Mr. Wolfowitz said.

Borrowers have an important role to play, as do lenders, he said.

“The policies of lending agencies ought to be structured in such a way that there are positive incentives for staying within sustainable debt limits and some disincentives for going beyond them,” Mr. Wolfowitz said.

Mr. Wolfowitz, the former No. 2 at the Defense Department and an architect of the Iraq war, took the helm of the World Bank last year. Its stated mission is to fight poverty and improve the living standards of people in developing countries, and it lends about $20 billion a year for various projects.

In another matter, Mr. Wolfowitz said the World Bank will be paying attention to the IMF’s efforts to remake itself to better reflect changes in the global economy.

Last week, the IMF’s executive board endorsed a resolution to modestly increase the voting power of four rapidly growing countries: China, South Korea, Mexico and Turkey. The resolution still needs approval by the fund, when it meets in Singapore.

The fund also is working on a broader plan to revamp voting rights for all its member countries. That plan isn’t expected to be finalized until next year or 2008.

Mr. Wolfowitz said “this question of voice and representation” is important to the World Bank, too. “We have catching up to do, but we will catch up,” he said.

On other topics, he stressed the importance of efforts to thwart corruption, which can be an obstacle to effective development.

He also expressed interest in seeing the bank do more to help countries in “post-conflict” situations. He pointed to Liberia, which emerged from years of civil war with new leadership, as a good example where the bank was able to speed up aid to the country.

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