The Economy

World Bank Approves $13B Paid-in Capital Hike

“This boost in capital was essential for us to advance our efforts to mobilize additional finance for development," the bank's president says.
Matthew HellerApril 23, 2018

Shareholders of the World Bank have approved the lender’s first capital hike since 2010, agreeing to a $13 billion paid-in capital increase that more than doubles its lending capacity.

The capital increase, which was initially opposed by the U.S., will add $7.5 billion paid-in capital for the World Bank’s main concessional lending arm, the International Bank for Reconstruction and Development, and $5.5 billion for its commercial-terms lender, the International Finance Corp.

The IBRD also will get a $52.6 billion increase in callable capital.

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The agreement would allow the World Bank to raise overall lending to nearly $80 billion in fiscal 2019 from about $59 billion last year and to an average of about $100 billion annually through 2030.

“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,” World Bank President Jim Yong Kim said in a news release.

“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,” he added.

The capital hike is part of a package of measures approved on Saturday that also includes changing IBRD’s lending rules so it can charge higher interest rates for developing countries with higher incomes to discourage them from excessive borrowing.

“IBRD previously had charged similar rates for all borrowers, and U.S. Treasury officials had complained that it was lending too much to China and other bigger emerging markets,” Reuters reported.

U.S. Treasury Secretary Steven Mnuchin said earlier on Saturday that he supported the capital hike due to the reforms that went with it.

Under the agreement, China’s shareholding in IBRD will increase to 6.01% from 4.68%, while the U.S. share would dip slightly to 16.77% from 16.89%. Washington will keep its veto power over IBRD and IFC decisions.