£20m pledged by McCreevy to World Bank

Ireland has pledged a record £20 million to the World Bank, to be used in providing cheap development loans to poor countries.

The Irish contribution, made by Department of Finance officials at a pledging conference in Copenhagen this week, played a major part in encouraging other countries to make generous pledges, according to a World Bank spokesman.

However, the move by the Minister for Finance, Mr McCreevy, to direct such a large sum to the World Bank could prove controversial at home. The Minister is currently embroiled in a row with the Minister of State for overseas aid, Ms Liz O'Donnell, over planned cuts in the overseas aid budget.

The Irish contribution to the 12th replenishment fund of the International Development Association (IDA) comprises a basic contribution of £15 million and a supplementary payment of £5 million. The money will be paid out over five years rather than the normal eight, thereby adding an additional net present value £1.4 million to the package. The IDA is the soft loan arm of the World Bank, and makes finance available to poor countries at very low rates of interest.

According to the bank spokesman, Mr Tim Cullen, Ireland's decision to almost double its contribution "set the tone" for the conference. "Everyone was impressed by Ireland's willingness to make a contribution to the world's poorest countries."

The 38 donor countries attending the Copenhagen conference ended up making total pledges of more than £8 billion, more than was originally expected.

The total Irish contribution amounted to 0.26 per cent of this amount, significantly more than the 0.18 per cent that the State was expected to contribute, relative to Irish gross national product.

Although the US remains the largest donor - it pledges 21 per cent of total funds - it is less generous than Ireland, relative to GNP.

Mr McCreevey's decision to channel funds towards the World Bank represents a further realignment of spending on the Third World. Earlier this year, the Department announced a £14 million debt relief package for African countries. Meanwhile, Ms O'Donnell has threatened to resign if more funds are not made available for State-run Irish Aid projects and programmes run by aid agencies and missionaries.