The president of the World Bank will use this week’s annual meetings to try and secure agreement from finance ministers for an increase in the institution’s capital amid growing optimism that a deal can be struck at the Spring 2018 meetings.
Jim Yong Kim said the extra funding was key to his plan to leverage trillions of dollars of private capital to pump into development finance.
He told GlobalMarkets he would warn member states it would not be possible to “crowd-in” private finance without first securing money from shareholders.
The bank last received a general capital increase in 2010, when it raised $86bn, including $5.1bn in up-front capital. “We are moving in a direction and the vast majority of countries now, we think, are onboard and it’s just a question of when the capital increase will actually happen,” Kim told GlobalMarkets.
“We made the case just by showing how much demand there is for us to work with countries and now it’s just a question of timing, and so we hope that there will be a discussion during these annual meetings, and that there will be a deadline as to when the final decision would be made.”
A report going to the Development Committee meeting on Saturday, seen by GlobalMarkets, says it aims to present proposals to Governors at the 2018 Spring Meetings.
'Billions into trillions'
He said that by using financial tools to de-risk projects in emerging and developing countries such as taking first-loss positions and providing insurance guarantees, the World Bank could turn “billions into trillions” by attracting capital currently looking for investment opportunities.
“We think that we can multiply many times the amount of money available for developing countries by using these tools,” he said. “But in using these tools we also have to raise that money on capital markets, and right now, we are at a point where our ability to do so is very constrained.
“We definitely are focused on crowding in more private capital, but there’s no way to do that without us having more capital ourselves. And I think now everybody on the board understands that.”
Scott Morris, a senior fellow at the Center for Global Development, said Kim was right to seek extra capital. “If they want to go from billions to trillions, do they have the billions to hand and will they have them for the foreseeable future and that’s where there’s some concern at the moment,” he told GlobalMarkets.
Hopes of getting agreement from the US, the bank’s biggest shareholder, faded after president Donald Trump proposed a cut in funding for multilateral development lenders such as the World Bank by $650m over three years.
“There has been a discussion about the capital increase… and there’s a lot of uncertainty about that right now given no clear signals coming from the Trump administration,” Morris said. “I think it is fair to say that without direct US support for capital increases it will be a major challenge for the Bank to move forward on those.”