Monitoring Desk
WASHINGTON: The World Bank (WB) is seeking to vastly expand its lending capacity to address the growing climate change and other global crises and will discuss with shareholders ahead of April meetings on proposals that include new lending tools and a capital increase, according to an evolution roadmap.
The roadmap document — shared with shareholder governments — marks the start of a discussion process to alter the bank’s financial resources and mission and shift it away from a project-specific and a country- and lending model used since its establishment at the end of World War II, Reuters news agency reported.
According to the roadmap, the World Bank management aims to have particular proposals to change its mission, financial capacity, and operating model ready for approval by the joint International Monetary Fund (IMF) and World Bank Development Committee in October 2023.
A World Bank spokesman said that the roadmap document aimed to offer details on the scope, timetable, and approach for the evolution, with regular updates for decisions and shareholders later in the year.
World Bank to mobilize private capital
The World Bank will explore options, including potential new capital increases, changes in its capital structure to unlock new financing and lending tools such as guarantees for private sector lending, and other options to mobilize more private capital, according to the roadmap document.
However, the World Bank Group is reluctant to bow to demands from a few non-profit organizations to close its longstanding top-tier credit rating to enhance lending, stating: “Management will elaborate all options that increase the capacity of the WB Group while maintaining the AAA rating of the World Bank Group entities.”
Janet Yellen, US Treasury Secretary, has called for the World Bank and other lending institutions to revamp their business models to enhance lending and utilize private capital to fund investments that more widely benefit the entire world, such as helping middle-income nations transition away from coal energy.
A US Treasury spokesperson refused to comment on the WB roadmap document.
The WB said proposals under consideration include lower equity-to-loan requirements, higher statutory lending limits, and the use of callable capital — money announced but not paid in by member countries — for lending.
Development experts say this shift would significantly boost the lending amount compared to the present capital structure, which only uses paid-in capital.
