New World Fund?

Packing his bags for next month's meeting in New Delhi of governors of the World Bank and the International Monetary Fund, Treasury Secretary Robert B. Anderson last week got some travel orders from President Eisenhower. Wrote Ike: "The time has now come for us to consider, together with the other members of these two agencies, how we can better equip them for the tasks of the decade ahead." Anderson's orders: support increases in member-nation contributions to the bank and the fund. In addition, he was ordered to open negotiations toward establishing a third fund subscribed to by bank members and known as the International Development Association.

The World Bank's need for new capital is not pressing, despite the fact that last year's $710,800,000 in loans to 20 nations is almost double its previous record year, and the long-range outlook is for a continued increase in loans. By voting an increase in the bank's authorized capital and by raising quotas (50% is the suggested figure) to provide it, the governors would help the sale of World Bank bonds on the world's markets. The bank now has capital of $9.4 billion, but bankers feel that its bonds are in demand only up to the $3,175,000,000 limit of U.S. liability under present quotas.

Cash Needed. But IMF does need cash. In boom, recession or crisis, the trend is toward increasing demand. Since Suez the fund has passed out in hard money loans some $2.7 billion, or two-thirds of all its outlay since the IMF was organized. Moreover, quotas have become unrealistic. Booming West Germany with $5.8 billion in foreign exchange and gold reserves is assessed only $330 million; the United Kingdom, with reserves of only $3 billion has a $1.3 billion quota.

Most international financial experts believe quotas on both the World Bank and the IMF should be raised. But there is skepticism over Ike's third point, the International Development Association. The association would make long-term low-interest loans for projects the bank did not want to back because the borrower might not be able to pay back the money in hard currency. The IDA would accept repayments in soft currency.

Lessening the Pressure. Some world bankers were skeptical of such a fund when first proposed because it smacked too much of funny money. But more of them have been coming round to the view that such a fund is necessary to finance vitally needed development programs that the bank cannot back because they contain individual projects that will not pay off. With the proposed new fund, the bank, for example, could finance a dam, while the IDA could finance nonself-liquidating projects needed to develop the area around the dam. One big point in IDA's favor: it would lessen the pressure on the U.S. for shaky loans or grants. It would also cool the heat on the U.S. in another way. The U.S. has often had to talk tough to a borrower after loans were granted, to force him to put his fiscal house in order. A borrower would undoubtedly take such talk from the nations in the fund with much better grace.

This week reaction to the U.S. stand at New Delhi was generally enthusiastic. But by the time the 66 nations sit down together there may be diverging points of view, particularly over the increase for the International Monetary Fund. Some hard-pressed nations will be loath to ante up additional gold and dollars. But the U.S. opposes a counterproposal that only such hard-currency nations as the U.S., Canada and West Germany raise their quotas, will insist that at least three-quarters of the members go along.

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