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What's At Stake In The World Bank's Quest For A Capital Increase? (Devex)

October 13, 2017

From the article:

A U.S. Treasury official told Reuters this week that the U.S. believes the bank needs to examine its lending to “countries and to projects that already have ample borrowing capacity.” Some see that position as evidence the Trump administration is using the World Bank as a sort of battleground in its economic fight with China.

But Kim — and a number of World Bank experts — point to several reasons why it makes sense for the bank to continue lending to China and other large economies, even if those countries could find access to other sources of capital...

“If you’re going to prioritize those issues … that are global in nature, you can’t ring-fence the issue to a low income country,” said Scott Morris, senior fellow at the Center for Global Development...

Whether the World Bank should receive a capital increase for IBRD — and how the bank might have to rebalance its positions to convince its biggest shareholders to grant that — is one small piece of a much larger conversation about development capital and the multilateral development banking system...

Nancy Birdsall, president emeritus at the Center for Global Development, cited CGD projections that by 2030, 86 percent of countries eligible for the World Bank’s fund for the poorest countries — the International Development Association — will be located in sub-Saharan Africa. If that happens, Birdsall said, then IDA will become a de-facto “African Development Bank based in Washington.”

Birdsall suggested that the MDBs’ shareholders should consider what it will mean over time to see a regional development bank — the AfDB — relatively marginalized by an increasing concentration of World Bank funding in the region where that regional bank operates.

“Is that the right way to look at the MDBs as a system? Let’s think that through,” Birdsall said.

Read full article here.

Related Experts

Photo of Nancy Birdsall
Senior Fellow, President Emeritus
Photo of Scott Morris
Senior Fellow, Director of the US Development Policy Initiative