Spring Meeting 2018 - Photo by World Bank

JAKARTA (TheInsiderStories)—The World Bank Group’s shareholders approved an additional $13 billion paid-in capital increase, which is regarded as a “historic” increase in the bank’s lending capacity, which can also strengthen the lender’s ability to scale up resources and accelerate its poverty eradication missions.

The World Bank noted that the capital injection package, which is expected to be formalized at the annual meetings in Bali in October, will bring annual Bank lending capacity to $100 billion between fiscal year 2019-2030. This contrasts with approximately $59 billion in lending in 2017.

The agreed capital boost package by the Development Committee of the Board of the lender’s Governors consists of $7.5 billion paid-in capital for IBRD and $5.5 billion paid-in capital for IFC, through both general and selective capital increases, as well as a $52.6 billion callable capital increase for IBRD.

The boost in capital will be supported by a broad range of internal measures including operational changes and effectiveness reforms, loan pricing measures, and other policy steps to create an even stronger World Bank Group.

The additional capital for IBRD and IFC shows on the strong commitment of contributors to the International Development Association, as demonstrated in the IDA18 replenishment, the successful launch of IDA in the capital market, and strengthened MIGA financial capacity.

Following today, the combined financing arms of the World Bank Group are expected to reach an average annual capacity of nearly $100 billion between FY19 and FY30, benefiting all Bank Group members across the income spectrum.

“This boost in capital was essential for us to advance our efforts to mobilize additional finance for development to meet the aspirations of the people we serve. Our shareholders have asked the Bank Group to step up our leadership role in addressing the multiple overlapping challenges of our time, and this capital package allows for greater responsiveness to risks to global stability and security, particularly in poorer countries and fragile states,” World Bank Group President Jim Yong Kim said.

The package endorsed by the Development Committee follows through on shareholders’ commitment for the World Bank Group to better assist all client countries in addressing global challenges while deploying scaled-up assistance to areas that most need financing.

Across client groups, the World Bank Group will be able to support drivers of long-term sustainable growth—including investments in human capital and resilience. The package also puts forward a robust commitment by the World Bank Group to further strengthen its operational model and effectiveness.

The Development Committee also accepted the recommendations of the shareholding review completed earlier this year. These included a Selective Capital Increase (SCI) for IBRD which will result in rebalanced shareholding and reduce extreme under-representation while continuing to deliver increased voice and representation for emerging markets and developing economies in manageable steps.

The recommendations also included an SCI for IFC, which will result in a more closely aligned voting power between the institutions of the World Bank Group and will contribute to the IFC capital increase.

In addition, shareholders reiterated their commitment to the twin goals of ending extreme poverty and boosting shared prosperity and to the four key priorities that the World Bank Group’s forward look established: stay engaged with all clients; lead on the Global Public Goods agenda; mobilize capital and create markets; and continually improve effectiveness and the internal operational model.

The development committee communique noted the challenging environment in which the package was endorsed:“The capital package has been developed against the backdrop of a changing and increasingly complex development landscape. Despite impressive gains in recent decades, development progress remains uneven. Keeping up the pace of past progress and addressing emerging challenges will require sustained effort in the face of persistent global headwinds and structural changes to the global economy.”

The Development Committee welcomed the successful conclusion of the negotiations on the financial and policy package, and have asked the Board and management to submit draft resolutions to Governors by the end of June for approval by the Annual Meetings 2018.

Email: linda.silaen@theinsiderstories.com

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The Insider Stories Founder Linda Silaen has a solid, proven history, established over more than a decade as a journalist with a leading internasional news organization, of being the first with the biggest economic news stories in Indonesia. Specializing in corporate news, Linda is also a veteran of some of the biggest macroeconomic and general news stories as Indonesia rapidly transforms into a major market economy. One of the founders of the original blog from which this company developed, Linda’s knowledge of investors’ information communications and data us developed from unrivaled networking skills that make her a well-known name among CEOs, bankers, government officials and private equity investors both in Indonesia and other countries.

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