Treasury presses Congress for World Bank funding

Reuters News
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Posted: Jun 14, 2011 12:19 PM
Treasury presses Congress for World Bank funding

WASHINGTON (Reuters) - Profound changes sweeping the global economy, including the growing influence of China, make it vital that the United States continue to financially support the World Bank and other development banks, a top Treasury official said on Tuesday.

"If we do not secure congressional authorization for recapitalizing and replenishment of these multilateral institutions, U.S. leadership will wane," Treasury Under Secretary Lael Brainard said in prepared testimony for a congressional hearing.

At a time when Republicans are pressing for spending cuts to bring down the huge U.S. budget deficit, President Barack Obama is asking to put more money in development projects of the World Bank, the African Development Bank and the European Bank for Reconstruction and Development.

The funding request coincides with intense behind-the-scenes diplomatic negotiations over the future leadership of the International Monetary Fund, following the resignation of Dominique Strauss-Kahn.

The IMF post has traditionally been headed by a European. If that were to change, the United States would face increased pressure to give up leadership of the World Bank when current president Robert Zoellick's term expires in mid-2012.

But some see a risk Congress would cut support for the World Bank with an American at the helm.

Brainard argued that the benefits the United States receives from supporting the multilateral development banks are well worth the price that it pays.

Since World War II, "the multilateral development banks have been pillars of U.S. global leadership, bulwarks for U.S. interests, and shepherd of U.S. values around the world," she told a House of representatives subcommittee.

Every dollar the United States contributes to replenish the World Bank's International Development Association and the African Development Fund leverages $25 of multilateral development investments to fight hunger and disease, support fragile states and tackle global challenges, she said.

U.S. refusal to help replenish the Inter-American Development Bank could be seen "as a deliberate U.S. retreat from the region at the very time that other emerging donors, such as China, are increasing their presence," she said.

(Reporting by Doug Palmer; Editing by James Dalgleish)