is clearly an untenable situation and raised the difficult question of how far tc bank can show greater flexibility in rearranging amortization schedules for its loans under certain specified conditions.
The Bank and its members have tried to take account of the difficulty of the poorer countries through establishing the IDA as “the soft window” of the World Bank Group. But this has been associated with a new element of instability because every few years IDA must seek its replenishment. This is an exercise beset with many political troubles and resulting in periodic spells of uncertainty in international development finance. We must search for more assured and more enlightened solution The idea of a link between special drawing rights and development finance is perhaps one of the most promising initiatives that has been proposed in the postwar period, and could do for international development finance a service as great as the activation of SDRs has done for the international monetary system. We hope that the Fund's studies on this subject will be concluded in good time for consideration before decisions are taken on the second SDR period.
Another problem that comes increasingly to the fore as the World Bank Group grows in importance and prestige is the possibility of conflict between its strictly economic functions and the political implications of its actions. The world is a highly turbulent place and however much we seek to bring a sense of order to it, there are inevitably times and situations in which differences in objectives will arise. In this troubled framework the manner in which the World Bank Group acts, as well as the substance of its actions, must be carefully guarded lest harm be done to relationships of trust. Perhaps the need is for a greater sensitivity to the political consequences of actions by a staff that is expert in its own restricted field of competence, but whose objectivity needs a stronger buttress in procedures and arrangements within the institution itself. A review in depth is necessary in the relationship of the Executive Board as representative of member governments and the management and staff of our institutions.
We have heard with interest in the address of the World Bank President the advocacy of development policies aimed at providing greater employment opportunities. If developing countries have not given to these objectives the attention that they deserve, a primary constraint is the larger claim that such programs make on internal financial resources and on scarce organizing ability. The shortage of domestic savings shows itself acutely in the creation of physical facilities using domestic labor. It is, perhaps, inevitable that developing countries have relied on the use of foreign equipment incorporating a technology not consistent with their own resource endowments simply because foreign saving could be obtained only through project loans. Moreover, because employment creating activities are likely to be widely diffused, involve small enterprises, and give returns that are hard to quantify in financial terms. Such activities are hard to fit into the normal mold of project loans. The Bank has been experimenting with general sector or program lending and its guidelines on local currency financing have also Provided some escape from the difficulties of bank financing for the foreign exchange component of projects. What is now required is a decisive move in the direction of program lending-that would greatly strengthen the feasibility of undertaking
