World Bank reforms

Both the US and the UK said that, in the face of fiscal hardship at home, they would be looking for guarantees from the Washington-based World Bank that it is using its money effectively to assist developing countries.

"To this end, we will be seeking critical institutional reforms in any consideration of additional resources, said US Treasury Secretary Timothy Geithner in a statement at a meeting of the bank's development committee in Istanbul on Monday.

Douglas Alexander, Britain's secretary of state for international development, and Alistair Darling, chancellor of the exchequer, said the World Bank needs to become more transparent about how it is using its resources.

"We believe that the bank still has ample headroom and can continue to do more with its existing resources," they said in a statement. "The bank needs a more equitable shareholding structure, which gives developing country members a stronger voice."

French Finance Minister Christine Lagarde said she did not think the World Bank needed a fresh influx of capital for the time being.

But some developing countries argued that they were depending on the World Bank to fill the gap created by lower foreign investment levels, as a result of the crisis. Indian Finance Minister Pranab Mukherjee called on richer shareholders to "do their bit by supporting a capital increase."

The World Bank and its affiliated institution, the International Monetary Fund, are holding their annual meetings this year in Istanbul, Turkey, where the discussion has focused on internal reforms.

President stressing reform agenda

World Bank President Robert Zoellick acknowledged that the bank has to "stress a reform agenda." But he added that the bank was experiencing record demand for loans which would put "serious constraints" on his budget by the middle of next year. Zoellick said he was confident that the bank would achieve a deal on a fresh cash injection with its donors by an April deadline.

The bank's development committee, which sets policy, said in a statement that it was committed to holding meetings to agree on voting reforms.

"It will be important to protect the voting power of the smallest poor countries," the statement said. The committee endorsed a deal reached at last month's G-20 summit to shift voting rights by at least 3 percent towards developing countries. Developing nations, however, are demanding a 6-percent shift.

The World Bank loans money and extends grants to developing and poor countries to pay for investment in key areas such as education, health care and infrastructure. Its request for cash comes after the IMF, which targets wealthier countries, received a massive boost to its lending resources at the G-20 summit last April.

Warning for Eastern Europe

On a different note, the World Bank was among three key development leaders who warned of a potential "human and social crisis" facing eastern Europe and Central Asia.

"There are increasing risks of a major credit crunch in the region," the World Bank, the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB) said in a joint statement on Monday.

Analysts interpreted the statement as an attempt to curb growing optimism in an economic recovery, which could lead to excessive risk-taking.

"I think it's a warning from the international banks that (investors) should really be aware of the risks," Ralf Wiegert, a Frankfurt-based economist with IHS Global Insight, told AFP. "There is certainly strong potential for the financial crisis in eastern Europe to get worse in the next six months; the potential for bad loans is still rather large."

dc/AFP/AP/dpa
Editor: Nancy Isenson