Global financial institution the World Bank is seeking to increase its lending capacity in 2023 to address climate change and other global crises.
The lending body plans to enter negotiations with shareholders ahead of its annual meeting in April on plans for both a capital increase and new lending tools.
The plans have been detailed in an “evolution roadmap” document sent recently to shareholder governments. The document marks the start of a process to alter the bank’s financial resources and shift it away from a country- and project-specific lending model.
Management at The World Bank intends to have proposals to change its operating model and financial capacity ready for approval by the joint World Bank and International Monetary Fund (IMF) Development Committee in October, it says.
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.”
However, the World Bank Group (WBG) is not ready to bow to demands from some non-profit groups 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.”
US 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.
Development experts say this shift would greatly increase the amount of lending compared to the current capital structure, which only utilises paid-in capital.
“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 the development and climate finance, it will need a concerted effort by both shareholders and management to step up WBG financing capacity.”
According to the roadmap, World Bank shareholder countries could step up periodic contributions to the lender’s fund for the world’s poorest countries, like the International Development Association (IDA), which have declined in recent years despite increasing needs.
The World Bank will hope this announcement will go some way to improve its reputation, which was damaged last October after it was reported by a consortium of NGOs that the WBA continued investment in fossil fuel projects of nearly $15 billion since the signing of the Paris Agreement in 2015.
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