"The region which was our success story has become, in the eyes of many, a failure," the bank's vice-president for east Asia and the Pacific, Jean-Michel Severino, said on Tuesday. "We passionately want to turn this situation around."

A new bank report notes that "east Asia's downturn has mixed currency and banking crises with regional financial panic into a particularly virulent crisis." The report, `East Asia: The road to recovery', was released at the outset of the annual meetings of the agency's governors and policy-making `development committee' starting this week.

Economies throughout the region are shrinking -- Indonesia's could contract by 20 per cent this year alone. The relatively small and distant Solomon Islands could see a 10 per cent loss in gross domestic product (GDP) even as Latin America bracesfor trouble, according to the report.

"Children are being pulled out of school and put to work, food is being rationed...And women and girls are frequently the first to sacrifice their portions, and violence, street children, and prostitution are all on the increase," it states. "This is the human crisis."

However, the Bank itself has been dogged by anger on the streets of Asia and resentment among some of its own staff and executive directors because it has played a supporting role to the International Monetary Fund (IMF). The fund, which has insisted on austerity programmes in exchange for assembling multi-billion-dollar bailouts, is widely regarded as having precipitated the "virulent" crisis described by the Bank.

The Bank's latest report notes that "budgets were cut initially in all of the affected countries as part of the macro-economic adjustment process. While fiscal targets have since been adjusted in some countries, public services may still suffer cutbacks...Of particular concern arepotentially irreversible effects of cutbacks on investment in human resources."

The Bank appears to contradict the IMF's initial demands, arguing that interest rates in Asian countries under Fund-led bailouts should be allowed to fall further -- and that governments should increase deficit spending -- to spur domestic growth.

"If $10 billion were mobilised and used to increase government spending, it could finance a one per cent of GDP fiscal stimulus in the east Asia five that would have a profound impact in complementing ongoing structural reforms," Severino explained. The `east Asia five' - Thailand, Indonesia, South Korea, Malaysia and the Philippines - are the countries at the centre of the Asian crisis.

The IMF initially insisted that countries raise interest rates to attract capital and run budget surpluses by paring government spending but it has since softened its original demands.

Korea and Thailand will be allowed to post deficits instead of small surpluses this year. Indonesia is aimingfor a budget deficit of 8.5 per cent of GDP this year, considerably larger than the one per cent target agreed with the IMF last November. The IMF has endorsed interest reductions in Korea and Thailand.

"These are significant changes, and they've been Fund-led,'' an IMF official told IPS.

Soon after crisis struck last year, the Bank sought to take the initiative in marshalling resources for `pro-poor' programmes in the region. But it found itself under fire for darning frayed social safety nets to cushion the effect of the IMF's deflationary demands, instead of making a stand against them.

That task was taken up by Joseph Stiglitz, the Bank's outspoken senior vice president and chief economist, who in January blasted the IMF's actions as pouring fuel on the region's economic flames.

"Virtually every American economist rejects the balanced-budget principle during a recession," Stiglitz, a former top economic adviser to US president Bill Clinton, had said. "Why should we ignore this when giving adviceto other countries?"

The IMF already had taken the political lead in dealing with Asia -- a natural consequence of its mandate, and the result of active pushing by the US administration and other `group of seven' industrial powers - and Stiglitz was told by his superiors to keep quiet.

He has since resumed questioning the international financial orthodoxy -- to the relief of some of his colleagues although, officially, the Bank says his remarks are intended merely to stimulate academic debate.

Meanwhile, the Bank has thrown its financial support behind IMF-led bailouts in Asia, committing some $16 billion in emergency loans in fiscal 1998, which ended in June. Lending for social programmes is expected to triple over the coming year, according to Severino. Disbursements amounted to some $300 million in fiscal 1998 and should reach $900 million in fiscal 1999, he told reporters.

Severino sought to play down any appearance of disagreement between the agencies. "It's not our role to assess the role of theIMF," he said pointedly. "We don't do it and we won't do it."

As if to underscore that point, the Bank's latest report prescribes a longer-term structural reform agenda consistent with that of the IMF. This includes measures to restructure financial and banking sectors in Asian countries, improvements in public sector management, and anti-corruption efforts.