United States to increase oversight of the World Bank

Source: Senate authorizes probe of World Bank programs

On September 6, the United States Senate approved an amendment introduced by Evan Bayh (D-IN) that would enable the United States Government Accountability Office (GAO) to review World Bank operations.

In particular, the GAO plans to focus on three aspects of the Bank’s practices. First, the GAO will examine whether the International Development Association (IDA) properly made its interest-free loans to achieve its stated goal of poverty alleviation. The United States is especially concerned because it is currently negotiating its triennial contribution to the IDA funds. The Senate is apprehensive that 1) the Bank has provided large loans without sufficient means to measure their impact on poverty reduction; and 2) some of the funds are misallocated to overcompensate the Bank staff.

Second, the GAO will inspect Bank projects and loans to verify that they have been designed to minimize corruption. Recently, American businesses have raised concerns about the changes in the Bank’s procurement system that would require the businesses to bid for Bank projects designed by the Bank’s member countries. Through its investigation of the Bank’s anti-corruption efforts, the GAO will determine whether the United States will cut its contribution to the Bank by twenty percent. The United States adopted legislation in 2005 which authorized this decrease should the Bank not allow for greater transparency in its procurement system.

Lastly, the GAO will evaluate the necessity of Bank assistance to emerging economies such as China, India, Russia, and Brazil. Some Congressmen have suggested that the emerging economies should graduate from the Bank because they are able to obtain funds for their development efforts on the open market.

Discussion:

Do you think that the United States has the proper authority to enable one of its domestic agencies to investigate the World Bank? If so, what is the basis for that authority? If not, what other entity would be better suited to evaluating the Bank?

Is American oversight of the Bank enough to address the concerns of the Bank’s borrowers?