U.S. Senator Evan Bayh - Serving the People of Indiana
October 26, 2007

Zoellick urged to reform World Bank

Source: The Financial Times

An influential Democratic senator has written to Robert Zoellick, president of the World Bank, demanding reforms to make the organisation more transparent and expressing concern about its lending practices.

Evan Bayh, chairman of the Senate banking subcommittee on international trade and finance, said changes were needed to more effectively measure the success of bank-funded projects and guard against corruption. “Too often success is defined by the amount of money transferred, rather than whether the use of that money produces tangible results,” he wrote.

The letter signals that some congressional Democrats, traditionally viewed as allies of the bank and its poverty-fighting mission, have joined conservatives in pushing for change at the organisation.

Mr. Bayh’s intervention came as Congress negotiates with the World Bank over funding for the International Development Association (IDA), the lending arm responsible for providing interest-free loans to poor countries.

“Congress is more likely to support future commitments to IDA if they have a complete understanding of how taxpayer dollars are being spent by the bank and recipient governments,” he said.

The bank has faced intense scrutiny this year after an ethics scandal that led to the resignation of Paul Wolfowitz, its controversial former president in June. Mr. Zoellick has vowed to press ahead with the internal reforms launched by his predecessor but he is also anxious to stabilise the organisation after a traumatic year.

In his letter, Mr. Bayh urged Mr. Zoellick to reconsider the bank’s policy of lending to middle-income countries, warning that the organisation was deviating from its core mission to help the poorest countries achieve economic growth. “It is difficult to justify taxpayer support for an institution that lends money to countries that have access to other resources and do not truly need the bank’s assistance,” he said, citing China as an example. “China has over $1.4 trillion in foreign exchange reserves which it could draw down rather than borrow from the bank.”

The senator also complained about “excessive” salaries and benefits enjoyed by World Bank employees and questioned why the organisation had 12,000 consultants on its payroll, in addition to its 12,500-strong staff, making it the second-largest employer in Washington after the federal government. Thousands of Bank employees earn more than $200,000 per year, tax free, and some were receiving salaries above the range for their position, he said. “Many question whether this scenario stands at odds with an institution whose mission is poverty alleviation,” wrote Mr. Bayh.

A recent review panel headed by Paul Volcker, former chairman of the Federal Reserve, concluded that bank leadership was not taking adequate steps to fight corruption.

“These findings imply a deeply troubling willingness within the bank to turn a blind eye to serious weaknesses in project implementation,” Mr. Bayh wrote.

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