World Bank pledges more funds for poor in troubled states

By Anna Yukhananov

WASHINGTON (Reuters) - World Bank President Jim Yong Kim laid out a new strategy for the global development lender on Tuesday that includes a sharp increase in funds to help poor people in nations scarred by conflict and a pledge to partner with the private sector.

He also warned that a partial government shutdown in a politically divided Washington could have far-reaching consequences for the poor given the troubling signal it sends about the world's largest economy.

U.S. fiscal uncertainty "combined with other sources of volatility in the global economy could do great damage to emerging markets and developing countries in Africa, Asia, and Latin America that have lifted millions of people out of poverty in recent years," he said.

Kim has sought to energize the bank around a poverty-eradication goal since he assumed his post last year and has launched a major reorganization to make the institution more nimble and useful, especially to middle-income countries.

Inequality and limited opportunities for the poorest people in each country can drive instability and breed conflict, Kim said, pointing to developments in the Middle East, where a wave of protests drove decades-old rulers from power.

"This is what happens when prosperity is reserved for a select few," he said. "All of those left out feel deeply the burn of inequity."

In April, Kim committed the bank to twin goals of eliminating extreme poverty by 2030 and boosting the incomes of the poorest 40 percent of the population in each country.

To meet its goals amid greater competition for development funds and a tight budget, the World Bank must focus on "bold" projects and technical solutions to countries, Kim added.

That will involve working with the bank's private sector arm, the International Finance Corporation (IFC), to encourage businesses to create jobs in poorer countries.

"Embracing the private sector and their role in development is not about whether you like the private sector or you have warm feelings about (it)," he said, adding that it would be impossible to eliminate poverty and meet the infrastructure needs of poor countries with public money alone.

Aid from the official sector totals about $125 billion a year, but India alone is likely to need $1 trillion for infrastructure in the next few years.

Meeting its goals will also require the World Bank to focus on so-called fragile states, those either in conflict or vulnerable to it, which will house most of the world's poor people in the next five years. Kim said the bank's fund for the poorest will plan to increase its funding to fragile states by 50 percent over the next three years, as would the IFC.

According to a draft strategy paper presented to the bank's board last month, and seen by Reuters, the new focus will require cutbacks in other programs as the bank seeks to become more selective in its lending.

Kim made no mention of cuts in his speech ahead of the International Monetary Fund-World Bank annual meetings next week. In comments to reporters afterwards, Kim said the bank's comparative advantage lies in large-scale, "transformational" projects that can impact many people and address big problems, rather than focusing on small pilot projects.

He pointed to the example of $340 million the bank approved in August to finance a hydropower plant in central Africa's Great Lakes region to bring electricity to the power grids of three countries.

But the bank's increased support for such projects could put it in conflict with some aid groups, who contend big projects are more likely to disrupt the environment and displace people.

Kim also challenged people to build a social movement around the issue of fighting poverty, urging the use of social media and petitions.

He also reiterated the bank's commitment to addressing climate change, saying it is impossible to tackle poverty without dealing with the effects of a warmer world.

The World Bank wants to fund 10,000 megawatts of energy in three years, equivalent to the entire capacity of Peru, and also help 12 countries reform their energy subsidies, he said. (Reporting by Anna Yukhananov; editing by Krista Hughes, Tim Ahmann and Chizu Nomiyama)

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