The Bush Administration seeks to camoflauge its assault on the World Bank with the claim that the WB errs by lending money rather than handing it out. This makes the Bush Administration appear more generous than it is.
Aren't hand outs contrary to much of the economic conservatism that supposedly guides this Administration? Once you give money out, the only sanction for improper or ineffective use is the refusal to give out more money to the same borrower. But if the money is transferred in the form of a loan, the borrower must ensure that it is spent in a way that promotes economic development--spurring revenues that can later be used to repay that debt.
The repayment does not go to the rich countries, but back to the World Bank coffers so that the WB can recycle the money to needy projects in the developing world.
The Bush Administration hasn't said: the WB should give aid in grant form and, to compensate for the loss of capital, we'll compensate through matching annual contributions to World Bank funds.
The requirement that the WB begin handing out its funds would only deplete the World Bank's capital, and have it spend its way to its own elimination. That would be fine if the exhaustion of that capital would lead to the elimination of the bulk of world poverty, but the World Bank's capital reserves are not sufficient for that task. (The Bank has assets of about $236 billion. Contrast the US outlay on the War in Iraq.) Loans allow the World Bank to leverage its capital to accomplish more good than that available through grants alone.