Being caught in the middle of one of the most ferocious policy debates in the modern era is likely to pose a challenge even to the most robust institution.

When that institution is the World Bank, also beset by allegations of low morale and poor management, the problems are multiplied. However, especially since the September 11 attacks proved to many observers' satisfaction that issues of poverty and inequality in poor countries are intrinsically linked to international security, the Bank has found some defenders.

Before September 11, James Wolfensohn, the Bank's president, was under considerable pressure. Having asked staff earlier in the year to explain the apparent lack of morale at the Bank, he was a little taken aback to find that many of them identified the bank's management - and his own style in particular - as the source of the problem.

A memo from the Middle East and North Africa department of the bank - admittedly regarded as one of the more discontented areas - made the source of the low morale clear: "There is a deep and growing cynicism and to some extent even a sense of resignation among staff," it said.

"We are overburdened with growing, unco-ordinated and un- or under- funded mandates that are given to us all the time . . . And we are concerned that the management rhetoric of teamwork, culture, ethics, accountability are the mantra adopted by senior management but which we see practised far too rarely."

The bank has also been under pressure from the US administration. Frequently bemoaning the ineffectiveness of much development aid, the US Treasury has criticised the bank for mission creep and a lack of focus. It has called for radical reform, in particular saying that half of its lending to the poorest countries should be converted to grants since much of the lending is not repaid anyway.

Meanwhile, despite Mr Wolfensohn's attempts to reach out to development campaigners, the bank has remained the target of choice for many non-governmental organisations, with its record on structural adjustment, the environment and its attitude to development economics still under attack.

A paper on globalisation and growth prepared for this year's annual meetings, which were aborted following the September 11 attacks, did contain multiple qualifications to the pro-globalisation message but still received much criticism from NGOs.

Part of the World Bank's problem with much of this is that, by its nature, it finds it hard to hit back at criticism from its shareholder countries or from the NGOs with which it has sought to build partnerships.

Over the issue of grants rather than loans, for example, it has studiously avoided taking a public position on what form aid should take. Bank officials have been left to point out in private that less than 5 per cent of the loan book of the International Development Association - its soft-loan arm which lends to the poorest countries - has recently been in default, and that converting grants to loans would mean less money for lending in the future.

But there are signs that some other shareholders are limbering up to come to its aid, and that the more established NGOs might at least consider Mr Wolfensohn's bank one of the better visions of those on offer.

Despite pressure from the US, most other large shareholder countries have indicated that they do not support a large-scale movement to grants rather than loans. European governments have almost without exception lined up to oppose a large-scale movement towards replacing loans with grants, with the UK being particularly strident. Even the French, privately touted by the US Treasury as a supporter of the principle, have merely reiterated their support that, at most, 10 per cent of IDA loans could be transformed into grants. This dispute will come to a head this month [December] in a key meeting of donors in Switzerland.

Similarly, while few shareholder governments would go to the stake to defend James Wolfensohn as one of the great managers of history, some have been worrying that any replacement could be less congenial in other ways.

The presidency of the World Bank is traditionally in the gift of the US. With the current US administration's strong views on the potential direction for the World Bank not being shared by many other Group of Seven governments, the names of potential replace ments for Mr Wolfensohn circulating in Washington - such as the former US secretary of state James Baker - would not be welcomed by many other development ministries. In particular, most European governments generally support the World Bank's moves over the past decade towards a clearer focus on poverty and giving developing country governments and NGOs a greater say in the design of development programmes.

NGOS themselves also show some willingness to view Mr Wolfensohn as better than the likely alternatives, even if they have similar criticisms of his management style.

"What the bank needed when Wolfensohn took over was someone with a vision to change the bank to an institution focused on poverty," says an Oxfam official. "Wolfensohn has that vision, but the challenge is to implement it."

In a sense, how long Mr Wolfensohn stays in his job may turn out to be one of the less interesting questions about the World Bank. The battle over whether the direction in which he has taken the bank - with a stronger focus on the social and poverty dimension to development and an attempt to reach out to the bank's NGO critics - will be more crucial to its future.