Exclusive-World Bank seeks more funds to address climate change, other
crises -document
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[January 03, 2023]
By David Lawder
WASHINGTON (Reuters) - The World Bank is seeking to vastly expand its
lending capacity to address climate change and other global crises and
will negotiate with shareholders ahead of April meetings on proposals
that include a capital increase and new lending tools, according to an
"evolution roadmap" seen by Reuters on Monday.
The roadmap document - sent to shareholder governments - marks the start
of a negotiation process to alter the bank's mission and financial
resources and shift it away from a country- and project-specific lending
model used since its creation at the end of World War Two.
The World Bank management aims to have specific proposals to change its
mission, operating model and financial capacity ready for approval by
the joint World Bank and International Monetary Fund Development
Committee in October, according to the document.
A World Bank spokesman said that the document aimed to provide details
on the scope, approach, and timetable for the evolution, with regular
updates for shareholders and decisions later in the year.
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AAA RATING TO STAY
The development lender will explore options like a potential new capital
increase, changes to its capital structure to unlock more lending and
new financing tools such as guarantees for private sector loans and
other ways to mobilize more private capital, according to the document.
But the World Bank Group (WBG) is not ready to bow to demands from some
non-profit organizations to abandon its longstanding top-tier credit
rating to boost lending, stating: "Management will explore all options
that increase the capacity of the WBG whilst maintaining the AAA rating
of the WBG entities."
U.S. Treasury Secretary Janet Yellen has called for the World Bank and
others to revamp their business models to boost lending and harness
private capital to fund investments that more broadly benefit the world,
such as helping middle-income countries transition away from coal power.
A U.S. Treasury spokesperson declined comment on the World Bank
document.
The bank said proposals under consideration include higher statutory
lending limits, lower equity-to-loan requirements and the use of
callable capital - money pledged but not paid in by member governments -
for lending.
Development experts say this shift would greatly increase the amount of
lending compared to the current capital structure, which only utilizes
paid-in capital.
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![](../images/010323PIX/news_r47.jpg)
An atrium is seen at the World Bank
headquarters in Washington, U.S., October 14, 2017. REUTERS/Yuri
Gripas
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"The challenges the world is facing call for a massive step up in
the international community's support," the bank said in the
document. "For the WBG to continue to play a central role in
development and climate finance, it will need a concerted effort by
both shareholders and management to step up WBG financing capacity."
INADEQUATE FUNDING
The roadmap document cautions that a build-up of lending for climate
change, health care, food security and other needs may require a
capital increase to boost the capacity of the World Bank's
middle-income lending arm, the International Bank for Reconstruction
and Development (IBRD).
IBRD's $13 billion capital increase in 2018 "was designed to be
prepared for one mid-sized crisis a decade, and not multiple,
overlapping crises" including the COVID-19 pandemic, the war in
Ukraine and the effects of accelerating climate change, the document
said. IBRD's crisis buffers will likely be depleted by mid-2023, it
said.
Another option, according to the roadmap, is for World Bank
shareholder countries to step up periodic contributions to the
lender's fund for the world's poorest countries, the International
Development Association (IDA), which have declined in recent years
despite increasing needs.
The roadmap also offers the option of creating a new concessional
lending trust fund for middle-income countries that would focus on
global public goods and be similar in structure to IDA, with regular
funding replenishments that would be separate from the bank's
capital structure.
"Such a fund may attract donor bilateral resources separate from
shareholder budget lines supporting the WBG, and potentially include
donors beyond shareholders," such as private foundations, the bank
said.
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The bank said that the evolution of its mission to increase climate
lending while maintaining good development outcomes will require
additional staff and budget resources, which have declined 3% in
real terms over the past 15 years.
(Reporting by David Lawder; editing by Grant McCool)
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