Jim Yong Kim, in his first significant speech as president of the World Bank, urged rich countries to maintain their foreign aid budgets, even as many of those nations face pressure to significantly reduce spending.
“Developed countries have made significant contributions through aid,” Dr. Kim, a physician who previously ran Dartmouth College, said in prepared remarks for an event at the Brookings Institution in Washington on Wednesday. “They must continue this engagement given their stake in a strong and dynamic global economy.”
Dr. Kim, who replaced Robert Zoellick as World Bank president this month, also called on emerging market economies to play a bigger role in helping countries that remain stuck in poverty. “Emerging economies must increase their contributions, commensurate with their growing economic weight,” Dr. Kim said.
The remarks are significant because they represent Dr. Kim’s first opportunity to describe his priorities as the head of the world’s most prominent development lender. The decision to highlight aid funding suggests the World Bank is worried that richer countries, under tremendous pressure to reduce their debts, will do so by cutting what they devote to the world’s poor. Canada, for example, reduced its foreign aid expenditure by more than 5 per cent over 2010 and 2011, and the Harper government plans further reductions of 7 per cent – or $389-million (U.S.) – over the next few years, according to the Organisation for Economic Cooperation and Development.
Dr. Kim, an American who emigrated from South Korea to the United States as a child, won the first contested race to lead the World Bank. He is the first non-Caucasian to run the institution, which was created at the end of the Second World War, and his appointment represents a break in the pattern of handing the post to a banker or Washington official.
However, his appointment was not without controversy. His selection maintained the controversial agreement between the U.S. and Europe that ensures an American runs the World Bank and a European leads the International Monetary Fund. Dr. Kim also lacks a background in economics and finance.
Dr. Kim indicated he would lean on the expertise of his staff. He told his audience that he already has met with “hundreds” of people at the World Bank. His lack of expertise in economics didn’t keep him from weighing in on perhaps the biggest risk facing the global economy: the European debt crisis.
“It is urgent that European countries take all necessary measures to restore stability,” said Dr. Kim, noting that even if the euro-area crisis is contained, it still could reduce global economic growth by 1.5 per cent. A “major” crisis in Europe could trigger a “deep recession everywhere,” he said.