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Democracy Becoming New Goal of International Lending

May 5, 1990

WASHINGTON (AP) _ Governments and bankers are finding a new goal for lending billions of dollars internationally every year: the promotion of democracy.

This is a sharp departure the traditional political neutrality of banks, although that tradition is gradually being honored more in the breach than in the observance.

The World Bank, whose largest stockholder is the United States, has not made loans in recent years to Nicaragua or Vietnam. After the bloody Chinese suppression last year of student demonstrators, the United States arranged for $720 million in World Bank loans to be suspended.

Of the 152 governments that own the World Bank and International Monetary Fund, 30 of them will be owners of the new European Bank for Reconstruction and Development.

The United States will be the largest single stockholder in the new $12 billion bank when arrangements are completed. That is expected to happen May 30 in Paris.

″The purpose of the bank shall be to... promote private and entrepreneurial initiative in the Central and Eastern European countries committed to and applying the principles of multiparty democracy, pluralism and market economics,″ says the first of its Articles of Agreement.

That is a long journey from the ancient Roman proverb, ″Money has no smell.″ And the World Bank’s own Articles of Agreement say:

″The Bank and its officers shall not interfere in the political affairs of any member; nor shall they be influenced in their decisions by the political character of the member or members concerned.″

Members of the World Bank do include both communist and non-communist governments. The World Bank estimates total lending to Third World countries at $1.3 trillion. Some of the leaders of those countries are communists, others are authoritarians with other ideologies.

And there appear to be limits to how far the bank will go in rewarding ideology.

World Bank President Barber Conable, an American, took issue with a statement last week by Herman Cohen, assistant secretary of State for Africa. Cohen predicted that in the not-too-distant future the United States will make progress toward democracy a condition for aid.

″I don’t know what Mr. Cohen may have meant when he said that political conditionality was a desirable force,″ Conable said.

″We, obviously, respect democracy and support it but so far as our development work is concerned, it’s based on economic criteria.″

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