economics

April 28, 2010

Poorer Nations Get Larger Role in World Bank

Filed under: Uncategorized — ktetaichinh @ 12:43 am
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Members of the World Bank agreed on Sunday to support a $5.1 billion increase in its operating capital, the largest increase in general financing since 1988, and to give developing economies a greater say in running the antipoverty institution.

Mr. Zoellick carefully devised the capital increase and voting changes to be adopted together.

The $5.1 billion in so-called paid-in capital, which the bank can use for day-to-day operations, will bring the bank’s cash on hand to about $40 billion. Of the $5.1 billion, developing countries will contribute $1.6 billion in connection with a shift in representation that will give them 47.19 percent of voting power, up from 44.06 percent. The actions fulfill a pledge the bank’s members made in Istanbul in October.

In 2008, the bank’s members approved a smaller shift of 1.46 percent of voting power to the developing countries from the wealthy ones and added a 25th seat on the bank’s governing board, raising to three the number of seats for sub-Saharan Africa.

All told, the cumulative shift of 4.59 percent of voting power amounts to the greatest realignment in representation at the World Bank since 1988.

“As the developing countries gain more shares, they have to pay for them,” Mr. Zoellick said in the interview. “Part of the good story here is a burden-sharing story.”

The bank’s members approved on Sunday an $86.2 billion general capital increase, bringing the bank’s total subscribed capital, not counting about $26 billion in reserves, to $276.1 billion. But except for the $5.1 billion, that new money is “callable capital,” which resides with the member countries but can be drawn upon in an emergency. (The bank has never had to do so.) The callable capital lets the bank enjoy a top-notch credit rating and borrow at favorable rates. All but roughly $40 billion of the $276.1 billion is callable.

The bank’s members said it should redouble its focus on helping the poor, especially in sub-Saharan Africa; invest in agriculture and infrastructure; promote global “collective action” on climate change, trade and other priorities; combat corruption; and prepare for crises.

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