The World Bank is set to ask world leaders to provide a capital injection as a slowdown in emerging markets in addition to ambitious UN development goals that were agreed upon last month leaves the bank strapped for cash, the Financial Times (FT) reported on Sunday.
According to the FT, World Bank President Jim Yong Kim will lobby for members to boost its $253 billion capital base of its main arm, the International Bank for Reconstruction and Development, during an annual meeting next week in Peru.
The push for funding by Kim comes as the bank faces new competition from the Asian Infrastructure Investment Bank, China’s alternative and potential rival to the western-led World Bank and International Monetary Fund (IMF) that is aimed to finance much-needed Asian infrastructure projects such as construction of roads, railways, and airports.
The FT notes that some of the Word Bank’s 188 members are resisting the idea of capital injects, and argue that the bank should do more with its current resources to meet the rising demand for its loans.
An increase in the World Bank’s capital appears to have received some support from both the Obama administration and China, the FT notes, as both the U.S. and China committed to “further strengthen” the World Bank and regional affiliates like the African Development Bank “by enhancing their financial capacity”, during last month’s visit to Washington by Chinese President Xi Jinping. China also pledged to “meaningfully increase” its contributions to the World Bank.
However, any bid for a capital increase for the bank was likely to encounter resistance from U.S. Congress, who has still not approved 2010 reforms to the IMF’s monetary quota system, Nancy Birdsall, an observer of the World Bank as head of the Washington-based Center for Global Development, told the FT.
The request for a capital increase would come as the IMF warned last week that deceleration in emerging market economies will slow global growth this year, and also come ahead of a review of the bank’s shareholding structure, which is up for renewal in 2017. Securing a greater presence for China and other emerging economies is likely to be high on the agenda, the FT said.