World Bank calls for doubling of development aid

The World Bank estimates that financing the successful achievement of a key set of development goals known as the United Nation Millennium Development Goals (MDGs) could cost in the range of US $40 - 60 billion a year in additional aid for the next 15 years. The MDGs call for a halving of extreme poverty and for substantial improvements in health and education in developing countries by 2015. However, the World Bank warns that while this level of funding is crucial to meeting these global targets, developing countries will also need to reform their health, education, and institutional policies to improve the effectiveness of development aid. World Bank President James D. Wolfensohn has called on rich countries to double their overseas aid from the current level of about $57 billion a year, and to dramatically cut their agricultural subsidies. "Since September 11th, there has been a strong sense of global solidarity that the world's poor need better health, good quality education, and more promising lives not only as a moral principle but also because these are the ingredients for a more stable, secure world," said Wolfensohn in a statement released on Wednesday. "As we now see, this global solidarity has a price. It may look intimidating in total, but it may prove to be one of the most profoundly transforming investments the world community ever makes." The World Bank contends that policy reforms to promote productivity and growth, and improvements in delivering quality health care and schooling, will be as important as money in reaching the MDGs. It also argues that foreign aid is most effective in countries where sound policies and institutions create the right conditions to reduce poverty in all its dimensions. "While money is not the only input, or even the most important input, it is crucial for reaching the goals," said Shanta Devarajan, co-author of the new costing assessment and chief economist of the World Bank's Human Development Network. "However, if the aid goes to countries with poor policies and institutions, it is likely to be wasted. The question, therefore, is: If the necessary changes in policies and institutions are forthcoming, how much additional financial resources will be needed to achieve the 2015 goals?" Devarajan noted that the bank's preliminary estimate of the cost of reaching the MDGs is in the range of $40 - 60 billion and roughly consistent with the assessments of other international agencies such as the World Health Organisation and the United Nations Educational, Scientific and Cultural Organisation. The estimate in the recent Zedillo report of the UN of $50 billion in additional financing, and echoed subsequently by UK Chancellor of the Exchequer Gordon Brown, also lies in this range. The World Bank has been sharing its preliminary analysis with these other agencies and partners. [For further information, go to http://media.worldbank.org/error.htm]