UPDATE:=US Rep Frank Threatens To Withhold Money From World Bank

(Updates with more details, comments from panel witnesses and Frank)

By Jessica Holzer

Of DOW JONES NEWSWIRES

WASHINGTON -(Dow Jones)- A key U.S. lawmaker said he planned to block funding to the World Bank unless it improves its transparency and becomes more accountable.

"This committee will not convene to take up the question for approving funding for the World Bank or other institutions unless there are improvements," House Financial Services Chairman Barney Frank, D-Mass., said at a hearing held by his panel Thursday.

The World Bank, which is owned by 186 member countries, will be coming to the U.S. Congress next year for a further capital allotment. Frank, as chairman of the panel with oversight over the bank, has power to hold up the money.

Earlier this year, the World Bank began a review of its policies on disclosing information about its projects and decision-making. The bank's board is expected to consider proposed changes next month.

Critics have charged the reforms do not go far enough, saying the bank remains too secretive to the people affected by its activities. In addition, they argue the bank isn't held to account for ensuring its projects help to reduce poverty and don't harm the poor.

"It should be clear that the pace of reform is slow and the reforms on the table are likely to have limited impact and are insufficient to address longstanding criticisms," Columbia University economist Joseph Stiglitz said in prepared remarks before the panel.

Stiglitz, who has often been sharply critical of the World Bank, argued the bank should adopt a disclosure framework akin to the policies adhered to by the U.S. government under the Freedom of Information Act.

He also said changes should be made to ensure emerging market countries are better represented at the World Bank and other international financial institutions.

Vijaya Ramachandran, a senior fellow at the Center for Global Development, argued for more evaluation of the impact of World Bank development projects, and less focus on the bank's lending decisions.

"The lack of impact evaluation has not only hurt poor people but has also undermined the bank's own credibility with its member country governments, who are often frustrated in their efforts to find out what exactly is going on inside its headquarters and in its field offices," Ramachandran said in prepared remarks.

However, Richard Bissell, a board director of the Bank Information Center, argued that more access to World Bank board deliberations is needed. A proposal to release unattributed summaries of board discussions means that "citizens would continue to be kept in the dark regarding their government's positions," he said.

Bissell, who testified on behalf of Oxfam America, the World Wildlife Fund and other organizations, also contended the bank should beef up the appeals process for groups that have been denied access to information.

Stiglitz also took aim at the World Bank and other international financial institutions for pushing certain structural changes to poor countries' economies. He cited their advocacy of privatizing social security, which he contended would benefit the financial sector but make the elderly more vulnerable.

"The international financial institutions should not be pushing what might be viewed as a special interest agenda. They should be working to strengthen democratic decision-making processes, not selling questionable policies," Stiglitz said.

Frank said he would be pursuing legislation to involve the U.S. State Department more in the activities of the International Monetary Fund and other international financial institutions.

He argued that the IMF's involvement in Asia in the 1990s led poor people to associate democratic reforms with the harsh changes that often come with liberalizing an economy. He said greater participation by the State Department would help to avoid this situation.

-Jessica Holzer, Dow Jones Newswires; 202-862-9228; jessica.holzer@ dowjones.com

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