WASHINGTON, Nov 10: The World Bank has blamed the stingy attitude of rich nations, as reflected in cuts in their overseas assistance, for the perpetuation of mass poverty in the developing world.

A new bank study released here today notes that at a time when more and more developing nations are beginning to use foreign aid efficiently, its quantum has fallen to its lowest point in more than 50 years.

While the list of nations that can use aid effectively has risen, foreign aid fell to 0.22 percent of donor nations' gross domestic product (GDP) in 1997 — its lowest level since 1947. says the report.

"It is ironic and tragic that the volume of aid is declining Just as the environment for effective aid is improving." says senior World Bank research economist David Dollar, who is lead author of the study titled. 'Assessing Aid: What Works. What Doesn’t and Why".

It shows that, due to a wave of economic reform in developing nations in the nineties.

three out of four of the world's poorest people - about two billion people -- live in countries where more foreign aid would speed up poverty reduction.

Taking Into account inflation, financial aid from rich to poor countries is one-third less today than In 1990. If yearly aid flows were increased by $10 billion -- less than the amount necessary to restore annual aid flows to the level of 1990 - this would pull an extra 25 million people out of poverty provided that the new funds were target -ted to poor countries with sound economic management.

However, the same amount allocated across the board, in the way that aid is currently distributed, would lift only seven million people out of poverty. Donor countries could do a better Job of allocating aid. focusing a larger amount on poor countries with sound policies. Dollar said.

The study has used a broad definition of sound policies and institutions that closely correlates with economic growth and poverty reduction. These in-

clude: open trade, secure private property rights, the absence of corruption, respect for the rule of law, social safety nets, and sound macroeconomic and financial policies.

In poor countries that score well on these indicators, one percent of GDP in aid money translates into a one percent decline in poverty, a similar drop in Infant mortality, and roughly half a percent growth in national income.

According to the report, in 1996 some 32 countries with poverty rates above 50 per cent had policies and institutions that were better than average for all developing countries. These include countries as diverse as India, Bolivia. China. Ethiopia. Honduras. India. Kyrgyz Republic and Uganda.

The report finds that In these countries, every dollar of foreign aid attracts two dollars of foreign investment, because aid increases the confidence of the private sector and helps to provide public services that Investors need, such as education and infrastructure.

It argues that aid is more than just money. It is actually a combination of money and ideas or knowledge. In countries that lack the policies and institutions to make good use of large financial flows, aid agencies can sometimes help foster a climate for successful reform without offering large-scale financial assistance.

It. however, acknowledges that foreign aid has also been, at times, an unmitigated disaster. Large financial flows to countries that lack sound policies and institutions have had little impact. It cites the case of Zambia.

The report recommends that donor countries and institutions should consider the recipient country's overall public expenditure programme when providing aid. This is standard practice at the World Bank.

A dollar worth of aid to education may lead to little or no additional spending on education. says Lant Pritchett, co-author of the report and a principal economist at the World Bank. But while targeting

money to particular types of activities has little net Impact on spending in the favoured sectors. projects can often be valuable if they open the way for systemic change throughout an entire sector.

In Pakistan, for example, where traditionally few girls attend school, donors worked with local communities to identify ways of raising girls' enrolment. The government provided money to start new schools on the condition that local communities promise to raise girls' enrolment to a specified level.

The local community associations. which had control over hiring teachers, often hired female teachers for these new schools. Female enrolment jumped.

In such Instances, projects can be a valuable testing ground for new and promising Initiatives that can then spread on their own to other areas that are not directly covered by the project, the report says.

— India Abroad News Service