The World Banks Development Committee, which meets in
Istanbul tomorrow, faces urgent pleas for more resources on one
hand and threats by US politicians to block funding on the
The Banks president Robert Zoellick has warned of
serious constraints on resources by mid 2010 as it
continues to push out huge volumes of lending to emerging
markets in the wake of the financial crisis.
Bank lending soared to around $33 billion in the financial
year ended 30 June 2009, three times higher than in the
previous year. It is expected to reach $40 billion in the
current financial year.
The Banks shareholders last year asked it to
push out $100 billion to crisis-hit countries over a three-year
period, but Zoellick said this figure will probably be exceeded
But calls for more cash face obstruction in the US, the
largest shareholder, where Congressmen are urging that payments
be withheld until higher transparency standards are
Barney Frank, chairman of the powerful House Financial
Services committee, said last month that it would not convene
to approve funding unless there are
Frank told Emerging Markets in an interview that he
especially favours the Bank revising further its Doing Business
Report. This annual ranking of countries by their business
environment is regarded by opponents as slanted in favour of
anti-labour, anti-welfare practices.
The report is a terrible reactionary influence,
Frank said. Asked whether the stance might not hamper the
Banks work, at a time when the financial crisis has
exacerbated world poverty, he shot back: I think we
enhance the bank by what were doing.
Having the Bank open up enhances its effectiveness. If
you dont know the impact of what youre doing,
youre more likely to do wrong things.
In Istanbul this weekend, Zoellick says he saw no
obstacle from Congress, but acknowledged that all
countries are under budget strain and this is not an easy time
to be asking for [more money].
Among the funding possibilities are a Special Capital
Increase or a further General Capital Increase for the Bank,
Zoellick said. The Banks loans-to-capital ratio could
also come under scrutiny. It all depends on how close to
our shareholders want to push us to the edge.
An increase in loan pricing has already been put in place,
and the Bank is also looking to leverage some of its capital
that is paid in, in the form of local currencies.
Zoellick added in this context that he had advocated that
developing countries as whole should control over
50% of World Bank shareholdings. The G20 group of
advanced and emerging economies has also proposed that this
ratio should be 47%, he added.
Finance ministers from the G24 group of developing
countries, which speaks for borrowers from the World Bank,
noted yesterday that current expectations for crisis
lending [by the Bank] are now beyond the capacity of its
main lending arm, the IBRD, and that its private sector arm,
the IFC was also up against resources restraints.
The ministers called for an early decision on capital
adequacy of IBRD and IFC to ensure that the Bank Group can
respond adequately to demand both in the crisis recovery and
beyond. The injection of capital could be done through a
combination of a selective and general capital increase, they