World Bank failing to reduce poverty in poorest countries

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Poverty line fluctuates with conflicting data

Washington, May 19: The World Bank, the largest financer of projects in developing nations, is failing in its mission to reduce poverty in the poorest countries by paying too little attention to boosting economic growth, an internal audit found.

In the past 15 years, the bank put too much emphasis on social development and cut spending on bridges, dams, pipelines and other projects that have a more dramatic impact on economic growth, according to the report, obtained by Bloomberg News.

The World Bank’s model to fight poverty in the poorest of nations had, in practice, paid insufficient attention to fighting poverty growth, the 115-page report said. "Without growth, no sustainable poverty reduction is likely."

World Bank president James Wolfensohn, who is retiring at the end of May, cut by 40% financing for infrastructure projects since 1995 and shifted money to programmes focused on climate change and faith-based initiatives, annual reports show.

While infrastructure spending has begun to rise in the past 18 months, some economists say World Bank president-elect Paul Wolfowitz would scale back some of Mr Wolfensohn’s projects and overhaul the bank’s $20 billion lending operation.

"Somehow in the last few years it became kind of politically incorrect to talk about growth in the bank, and one could only talk about poverty reduction," New York University professor and former World Bank economist William Easterly said.

Only about one-third of the developing economies had expanded more than 2% per capita in the past decade, the auditor found. In roughly the same period, the number of people living on less than $1 dollar a day increased in more than 40 of 100 developing countries for which there is data, the bank said.

The study comes less than two weeks before the reins of the bank are passed to Mr Wolfowitz, who was President George W Bush’s hand-picked nominee to succeed Mr Wolfensohn. Since 2001, the Bush administration has sought to reduce what it calls a mission creep and make the bank focus on infrastructure projects. It would also like the bank to be more transparent when providing assistance and to justify future aid by showing past results.

"The report underscores the need for the World Bank to focus on economic growth as the most effective way to raise people out of poverty, and that we need to measure results at every level to understand and improve the effectiveness of programmes," deputy assistant US treasury secretary Tony Fratto said.