Treasury Secretary O’Neill Defends Bush Administration’s Proposal to Convert Half of World Bank Loans to Grants
U.S. Treasury Secretary Paul O'Neill at a "quiet conference" on international assistance yesterday "hotly defended" the Bush administration's recommendation that 50% of World Bank aid to developing countries be given in the form of grants instead of low-interest loans, the Wall Street Journal reports. O'Neill was responding to criticism by European officials, who said that the World Bank's funds will dwindle in the future if the bank "gives money away today" (Phillips, Wall Street Journal, 2/21). Bush stated in July that the World Bank should provide up to 50% of its assistance to developing countries through grants, rather than loans, so that the countries could "alleviate the debt that burdens" their economies (Kaiser Daily HIV/AIDS Report, 7/18/01). A number of lawmakers, AIDS groups and African groups have called on international lending institutions to forgive the debts of developing countries, stating that debt reduction would help the countries allocate more funding toward HIV/AIDS and other health programs (Kaiser Daily HIV/AIDS Report, 7/20/01). But Bush maintains that providing developing nations with grants instead of loans would help the countries more than debt relief, which he called a "short-term fix" (Kaiser Daily HIV/AIDS Report, 7/18/01). European officials have suggested converting 10% of World Bank loans into grants, but O'Neill said that this figure is too low. "It's hard for me when I look at ... the stage of underdevelopment for billions of people ... to say, well, let's do post-conflict countries and let's do a little HIV/AIDS and keep it under 10%," he said (Kahn, New York Times, 2/21). European officials are skeptical of the United States' recommendation for more grant assistance and "openly doubt that the United States can be counted on" to provide more assistance to the World Bank if the bank needs funds to provide more grants (Wall Street Journal, 2/21).This is part of the KHN Morning Briefing, a summary of health policy coverage from major news organizations. Sign up for an email subscription.