The debate over calls for a massive capital injection into
the EBRD to channel funds to crisis-afflicted countries will
come to a head this weekend when finance ministers gather for
the banks annual meetings.
Thomas Mirow, the EBRD president, has written to the
banks 63 governors, saying that if the Bank is to carry
on spending at the current rate, it will require more
The EBRD has already raised its lending target for this year to
a record 7 billion, a 37% increase on 2008s
5.1 billion and a reversal of previous plans to reduce
its activities to 3.9 billion.
In an interview with Emerging Markets, Mirow said he
wanted to get a sense of what amount and what direction
of engagement our shareholders expect from the Bank.
Are they happy with the substantive decisions we have
taken? Do they expect possibly even more from us?
His intervention follows the decision by shareholders in the
Asia Development Bank (ADB) to triple its capital base to $165
billion. The EBRDs last recapitalization was in 1996 when
the capital base was doubled to 20 billion.
Mirow wants to bring forward a decision on the next five-year
capital resources review to the Banks 2010 annual meeting
in Zagreb. That would mean that the basic footwork and
analysis would need to be started after this annual
meeting, said Kurt Bayer, the Austrian board director on
Several sources at the EBRD told Emerging Markets
Mirow did not want specific numbers mentioned this weekend.
They said while European countries, especially those in central
and eastern Europe worst affected by the crisis, wanted an
increase, there were signs of splits on the board.
One source said Japan which has contributed $100 billion
to IMF recapitalization and $25.7 billion to the ADB may
hesitate to commit to a capital increase. Two of the board
directors contacted by Emerging Markets played down
speculation of funding increases. No decisions are needed
or will be taken this year, one said.
The US will take no strong position as the Obama administration
has not yet clarified its policy. The job of under-secretary
for international affairs at the Treasury is vacant pending
Senate approval of a new candidate, Lael Brainard. The US
executive director declined to comment.
The EBRDs status will be boosted by news that Australia
has reversed last years decision to quit as a
shareholder. Australia will announce its about-turn at
tomorrows annual meeting but will warn it will
continue to review its position.
Market turmoil landed the EBRD with a 602 million loss on
its investment in 2008. Willem Buiter, a former chief economist
at the EBRD, told Emerging Markets: [The EBRD]
must be taking massive losses as a result of this crisis. Its
equity portfolio must look truly ugly so to maintain the volume
of its operations would need additional capital.
He said the EBRDs role had become muddled as
it moved away from its core role of stimulating private sector
business. It is an IMF-lite and it is unfortunate the
functions have become muddled up. They are getting brought into
issues that are not their mandate as its a case of all
hands on deck.