World Bank set for capital boost, tough vote talks
World Bank President Robert Zoellick also told Reuters in an interview that plans were coming together for a $3.5 billion capital increase at the institution -- its first in more than 20 years -- with funds coming from rich countries and newly emerging powers.
That would help the World Bank restore its firepower after lending heavily during the financial crisis to help developing countries cope with the plunge in global demand and steep decline in private capital flows.
Shifting voting power in the Bank, which would generate a further $1 billion in new capital, is politically thorny because it means countries especially in Europe have to give up some of their voting power to developing countries.
Britain, one of the Bank's largest contributors, is in the midst of a national election and there are concerns it may not be able to take a position until after the ballot on May 6.
Even Nordic countries, traditionally generous with development aid, are reluctant to accept less voting power.
Leaders from the Group of 20 major developed and developing countries agreed at meetings in Pittsburgh last year to a 3 percent shift in overall voting power in the World Bank and at least 5 percent for the International Monetary Fund.
Emerging economies, which have pushed for a 6 percent shift in voting power at the World Bank, expressed concern that even 3 percent could be a tough sell.
"I don't think we will manage more than 3," one Brazilian official told Reuters.
The G20 pressed for an agreement on voting power at the World Bank at this week's meeting to coincide with the larger capital increase for the institution, while the shift in power at the IMF will be decided early next year.
The World Bank and IMF said on Sunday they expect to go ahead with the April 22-25 meetings of global finance chiefs despite air travel disruptions across Europe caused by volcanic ash.
Like other development banks, the World Bank committed record sums of funding -- more than $100 billion over the past 18 months -- to support developing countries as global trade collapsed and access to credit disappeared due to the crisis.
Zoellick said demand for such help should fall as the world economy recovers but nothing is certain.
"The strength of the recovery is a serious question mark," he told Reuters ahead of the meetings.
He said part of the Bank's lending strategy during the crisis has been not just to hand over money to countries but to invest it in ways that boost productivity, whether it is infrastructure or education.
With the budgets of rich donor countries squeezed by the financial crisis and public debt levels rising, Zoellick has tackled the resource increase in two parts: through a general capital increase -- the first in more than 20 years -- and the other through adjustments in members' subscriptions, or quotas.
The latter would increase the voting power of developing countries that recognizes the growing economic clout of rising powers like India, China, Russia and Brazil, and also poorer ones in Africa and Latin America.
"People are coming together on the capital increase and I think people are looking at about $3.5 billion for that," Zoellick said in an interview with Reuters. "That to me would be a good result."
Zoellick acknowledged that while he has been able to find compromise on the capital increase by convincing emerging market countries to increase their contributions, the shift in members' quotas is a decision that is out of his hands.
Developing nations have raised their contributions including through higher interest charged on their bank loans.
"It's a shareholder decision and one (where) I have less levers because they have to decide," said Zoellick. "On this one, the allocation remains a difficult issue for the shareholders to work out."
Asked whether it was possible for an agreement to be concluded this week on at least a 3 percent shift from developed to developing countries, Zoellick said he was cautiously optimistic.
"I believe the shareholders are committed but it's a fractious process."
Recognizing Global Changes
In a speech last week, Zoellick said rich countries can no longer impose their will on developing countries that are now major sources of global growth. He said this shift had profound implications for multilateralism, global cooperation and the work of institutions such as the World Bank.
Members' willingness to cough up more resources for the World Bank has also come with demands for Bank reforms.
Zoellick's biggest accomplishments have been in the way he has accelerated support to help countries cope with the global food price crisis and world financial turmoil.
In a document prepared for discussions by World Bank member countries this week, the Bank has outlined reforms to modernize its products and services, and an ambitious program to put more staff in the field.
Zoellick also said that from July 1 the Bank would become more transparent and disclose more internal documents including country assistance strategies and project appraisals before they go to the board for approval.
[Sourece: Reuters, Washington, 18Apr10]
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