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World Bank: Wolfowitz Resigns As President

Wolfowitz bowed to weeks of pressure over a favoritism scandal (AFP) May 18, 2007 (RFE/RL) -- The World Bank has announced that President Paul Wolfowitz will resign on June 30, after a special bank committee determined that Wolfowitz violated bank rules by overseeing a wage increase for his girlfriend, a bank employee.

Wolfowitz admitted he erred in his handling of the issue, but said he deserved to keep his job.

Speaking today to journalists outside his home near Washington D.C., he said he had accomplished much during his tenure.

"I've gotten a lot of very gracious comments, notes and emails from staff. I'm grateful for that, and I am particularly grateful for the hard work they've put in the last two years," he said. "We've accomplished a lot in the last two years, I said that in [my written] statement. And I say 'we' -- I'm happy to claim a little bit of credit, but it couldn't happen without them. So, that's the only message I'd like [to give] this morning."

Critics Blast 'Unilateral' Style

The events leading up to Wolfowitz's resignation were not his first encounter with controversy. Disputes have dogged him since the day he was chosen by U.S. President George W. Bush to head the World Bank in early 2005.

That was partly because the 63-year-old former deputy secretary of defense had been a driving force behind the Bush administration’s case for invading Iraq. European governments that opposed the war were skeptical about Wolfowitz taking over the world’s top development institution.

Yet at the beginning, despite their misgivings, many of Wolfowitz’s critics were willing to give him a chance to prove his leadership capabilities, according to Sheila Page, a senior analyst with London’s Overseas Development Institute.

Wolfowitz quickly ran into problems at the bank, and angered officials by suspending aid to several countries over corruption concerns.

“The rest of the world was sort of pleased to have someone who clearly had the confidence of the U.S. government, which is important if you’re trying to get funding," Page says. "No one knew very much about what he thought about development, so people were willing to give him the benefit of the doubt until he got started.”

While Wolfowitz won some praise in Africa and Asia, he quickly ran into problems at the bank, which channels some $25 billion a year in loans and grants to poor countries.

In one instance, he angered officials by suspending aid to several countries over corruption concerns without consulting bank board members.

Page calls Wolfowitz’s management “unilateral” -- an adjective that was often used to describe the early Bush administration’s foreign policy, over which Wolfowitz had much influence.

“I think within the bank there was opposition fairly quickly because he brought in some of his ex-colleagues, and no organization likes having outsiders brought in like that," Page says. Moreover, "he seemed to be not really following normal bank procedures on this -- I mean, even before we knew about all the problems with his friend.”

Conflict of interest

His friend was Shaha Ali Riza, his companion.

Earlier this week, a special bank committee ruled that Wolfowitz had violated bank ethics and governing rules by arranging for a wage increase and promotion for Riza, a World Bank Middle East expert.

The pay raise saw Riza’s salary jump from $130,000 a year up to $180,000 a year. Wolfowitz said he authorized the raise so that Riza would accept a temporary assignment outside of the bank upon his arrival as the new head. The transfer was intended to solve the potential conflict of interest caused by having one bank official working under another one with whom there is a romantic relationship.

Wolfowitz fought to clear his name of any charges of misconduct and argued that he did not deserve all of the blame for having favored his companion.

But in the last few weeks, as the controversy seemed to spiral out of control, the bank started to run into funding problems.

Page says major donors became unwilling to fund projects in the developing world due to fundamental doubts over Wolfowitz’s leadership. The needed money, she says, "wasn’t flowing in. They didn’t have confidence in him. Certainly, it would have been publicly very difficult to show support for the bank in the last couple of months with all the controversy going on. And there was doubt over his priorities. No one ever really saw what it was he was trying to turn the bank into.”

The bank’s European board officials said Wolfowitz decided to resign after he realized he had lost the support of developing countries, including those in Africa that had supported him until just a few days ago.

On May 17, Wolfowitz ended the controversy. Announcing his resignation, which takes effect on June 30, he said in a statement issued in Washington, "The poorest people in the world...deserve the very best we can deliver. Now it is necessary to find a way to move forward."

Bush, speaking in Washington shortly afterwards, reluctantly accepted the resignation.

"I regret that it's come to this. I admire Paul Wolfowitz," Bush said. "I admire his heart, and I particularly admired his focus on helping the poor. Now, there is a board meeting going on as we speak. I can tell you I know that Paul Wolfowitz has an interest in what's best for the bank."

Who's next?

Who succeeds Wolfowitz is the subject of much speculation. The White House has made it clear that Bush intends to carry on the tradition of having Washington, the World Bank’s largest shareholder, name its president.

The European Commission today called on the World Bank to name a successor as soon as possible, while the global anticorruption watchdog Transparency International said in a statement that "urgent action is needed to restore the bank's credibility."

Possible successors cited in the U.S. media included former Deputy U.S. Secretary of State Robert Zoellick and Deputy U.S. Treasury Secretary Robert Kimmit.

But there are some non-Americans being mentioned as well. They include Tony Blair, Britain's outgoing prime minister; Stanley Fischer, the governor of the Bank of Israel; Ngozi Okonjo-Iweala, a former Nigerian finance minister; and Kermal Dervis, a former Turkish minister for economic affairs.