Senator bashes World Bank corruption
Kicking off a series of new hearings into corruption in projects funded by the World Bank and similar institutions, Sen. Richard Lugar said today that "billions of dollars that could have helped" the world's poor "have been siphoned off or squandered" over the years.
Lugar, the chairman of the Foreign Relations Committee, has been at the forefront of congressional reform efforts directed at the World Bank and four other multilateral development banks, namely the Inter-American Development Bank, the African Development Bank, the Asian Development Bank, and the European Bank for Reconstruction and Development.
"Everyone involved must understand that the history" of such banks, he said, "includes well-documented and unacceptable cases of waste, fraud, and abuse."
Lugar, an Indiana Republican, also cited a U.S. News report this week that detailed widespread corruption on World Bank projects. The story said that bank projects were plagued by kickbacks, payoffs, bribery, embezzlement, and collusive bidding. It also said that some knowledgeable analysts believe corrupt practices of one type or another may be associated with more than 20 per cent of the funds disbursed by the bank each year.
Lugar asked a senior U.S. Treasury official, Clay Lowery, whether his agency could confirm that estimate.
Lowery, the lead-off witness, told the Foreign Relations Committee that the Treasury Department did not have an estimate to offer, but he said that it was Treasury's view that "not one dollar should be lost" to corruption.
In his testimony, he said that the multilateral banks are making progress in weeding out corruption, but more worked needed to be done. Among other reforms, he said that the banks needed to be more open, that borrowing countries needed to greatly improve governance, and improved financial controls on projects were needed.
Lowery also applauded the anticorruption efforts of Paul Wolfowitz, the World Bank's president since June 2005. Wolfowitz succeeded James Wolfensohn, an investment banker, who launched the World Bank's anticorruption program a decade ago. The other banks then took up the issue.
In addition to Lowery, the foreign relations panel also heard from Adam Lerrick, a critic of the World Bank and an expert on monetary policy. Lerrick said that the World Bank has not been able to accurately evaluate how borrowing countries use the proceeds of its loans and grants.
Its programs, he testified, are reviewed by an internal bank evaluations department that can't hope to get the job done. Outside evaluators are needed, he said.
"The bank gives itself good marks and boasts that more than three quarters of projects completed had 'satisfactory outcomes,'" Lerrick said. "But when the auditors are captive, when the timing of judgment is premature, when the criteria are faulty and when the numbers are selectively manipulated–how credible are the conclusions?"
The World Bank has approved loans of more than $550 billion in its 60-year history. Headquartered in Washington, the bank provides loans and grants of more than $20 billion a year.
Lugar began an investigation of the five multilateral banks two years ago, and last year got Congress to adopt reforms encouraging more openness and accountability in the institutions. He plans additional hearings. The U.S. cannot impose its will on the World Bank and similar institutions. They are controlled by member countries. However, Lugar noted that the U.S. government has provided more than $42 billion in direct contributions to the development banks since 1960.
"The U.S. government," he said, "must work hard to ensure that this money is spent efficiently."
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