Seeking funds, Treasury says World Bank vital to US

By Doug Palmer

WASHINGTON (Reuters) – U.S. leadership on global economic issues could fade if Washington does not retain influence at the World Bank, a senior U.S. official said on Tuesday in an effort to persuade Congress to step up funding for the poverty-fighting institution.

“We also believe that the current president, Bob Zoellick, is doing an excellent job of steering the World Bank and advancing the goals of that institution,” Lael Brainard, the U.S. Treasury under secretary, told a congressional hearing on an Obama administration request for $2.07 billion to fund projects at the World Bank and other international development banks.

The testimony came as intense jockeying continues over the future leadership of the International Monetary Fund, following the resignation of Dominique Strauss-Kahn last month.

The IMF post has traditionally been headed by a European while the World Bank has always been led by an American. French Finance Minister Christine Lagarde appears to be the frontrunner for the IMF job.

She and Agustin Carstens, Mexico’s central bank governor, are the only candidates for the post.

The United States has not yet endorsed either one but is widely expected to back Lagarde.

Her selection would continue a 65-year-old tradition of having a European in the top slot at the IMF.

Reuters reported last week that Secretary of State Hillary Clinton had expressed interest in becoming World Bank president when Zoellick’s term expires in mid-2012.

Clinton denied she was pursuing the job, but the report added to frustrations among emerging economies that World Bank and IMF jobs are stitched up in advance.

“I think we believe that the World Bank has benefited tremendously from American leadership over the past several decades,” Brainard told the panel.

She insisted the United States favored “an open, transparent and merit-based” selection process for leaders of all the international financial institutions.

Emerging market economies argue that the selection process of the heads of the institutions should be based on a candidates qualifications, not nationality.

Brainard told lawmakers it was in the United States’ interest to fund World Bank and other development projects so it could continue to play a leadership role in the institutions.

“If we do not secure congressional authorization for recapitalizing and replenishment of these multilateral institutions, U.S. leadership will wane” and others like China will step into the breach, she said.

Brainard said the United States gets a good return from its investment in terms of more open markets for American exports and less risk of foreign wars or terrorist threats.

Since World War Two, “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 the House of Representatives subcommittee.

Every dollar the United States provides to the World Bank’s fund for poor nations and to the African Development Fund leverages $25 of multilateral development investments to fight hunger and disease, support fragile states and tackle global challenges, she said.

Still, a number of Republican lawmakers questioned the value of U.S. leadership at the World Bank and other global institutions at a time when they are under pressure to cut spending to reduce the huge U.S. budget deficit.

“What I’m trying to emphasize to you is you may not get any money,” said Representative Donald Manzullo of Illinois. (Reporting by Doug Palmer; Editing by James Dalgleish and Leslie Adler)