Some Countries Wary of World Bank Push

U.S. Wants Capital Expansion Tied to Reform

ISTANBUL -- The World Bank pressed
its campaign for a sizeable increase in capital,
warning that it could run short on money
to lend troubled developing nations by the middle of next year.

At the World Bank's annual meeting here,
a bank policy-setting committee said
it would decide in spring 2010 whether
to approve a World Bank capital
increase and how big it would be.

Approval is far from assured.
While a number of nations that borrow
from the World Bank endorsed the increase,
the U.S. and France, among other nations
that would pay the largest share of the increase,
didn't say yes.

Expanded funding for multilateral institutions
is always controversial in the U.S. Congress,
and has become more so given
the backlash against perceived "bailouts."
The Obama administration had
a difficult time this spring winning approval
for a big increase in funding
for the International Monetary Fund.
A World Bank research paper estimated
that a $5 billion capital increase would
cost the U.S. about $850 million over five years.

World Bank President Robert Zoellick
didn't ask for a specific amount in Istanbul
and said the bank's staff would "drill down
on our analyses of the capital needs"
of the bank.
He said that U.S. Treasury Secretary
Timothy Geithner told him he had made
"a reasonably good case" for the capital increase
but that "to be able to build support
with legislative bodies we also have
to stress a reform agenda."

Such an agenda would include
increasing public disclosure of
the bank's operations, Mr. Zoellick said.

Mr. Geithner said at the meeting
of the policy committee, that the U.S.
would be "seeking critical institutional reforms
in any consideration of additional resources."
Complicating the U.S. decision, he said,
was that regional development banks also
are running short of cash
and would likely turn to donors for capital.

Administration officials said the U.S.
hadn't decided whether
to back the World Bank request.

French Finance Minister Christine Lagarde
was even warier.
"The bank has a certain number options
and margins for maneuver [to raise money],
which do not justify an increase
in capital at the moment," she said,
according to a Reuters account.

Among the options the World Bank
is examining is a "contingent" plan where
the bank would request capital if its
equity-to-loan ratio diminished
by a certain amount.
If the bank's finances improved, "maybe
you would return some of the capital,"
Mr. Zoellick said earlier during the annual meeting.

The World Bank has greatly increased its lending
to deal with the global financial crisis.
It nearly tripled its lending to what it calls
"middle income" developing nations -- those
where per-capita income is between about
$1,000 and $12,000 -- to $33 billion in
the year ended June 30.
During the following three fiscal years,
the World Bank expects to lend about
an additional $100 billion to such countries

If the bank doesn't get more funds,
Mr. Zoellick said, by the middle of 2010
it would "face serious constraints."
At that point, he said, it would need to begin
to "ration" its lending, focusing
on the poorest countries first.

Mr. Zoellick, a former U.S. Treasury official
who helped shepherd an earlier capital increase
through Congress, said he would put together
reform policies that would make it easier
to win approval.
"We're in the world of politics here," he said.

Write to Bob Davis at bob.davis@wsj.com

Link here

             J-L K.
Procurement Consultant
Gsm:    (250) (0) 78-847-0205 (Mtn Rwanda)
Gsm:    (250) (0) 75-079-9819 (Rwandatel)
Home:  (250) (0) 25-510-4140
    P.O. Box 3867
  Kigali - RWANDA
    East AFRICA
Blog: http://cepgl.blogspot.com
Skype ID: kayisa66

No comments:

Post a Comment