World Bank shareholders approve historic capital increase

World Bank shareholders approved a "historic" increase in the bank's lending capacity Saturday after the United States backed a reform package that curbs loans and charges more for higher-income countries like China. World Bank President Jim Yong Kim said neither China nor any middle income countries was happy about the prospect of paying more for loans, but they agreed because of the overall increase in funds available. The agreement, which also increase shares and voting power to large emerging market countries like China, was "a tremendous vote of confidence" in the institution that came after three years of tough negotiations, Kim said.

"World Bank Group bureaucrats don't often jump around and high-five and hug each other," Kim told a small group of reporters following the Spring meeting. He said the increase was needed because even with the end of the global financial crisis, the bank has been called on to provide funding to address a new series of challenges facing poor countries, like climate change, refugees, pandemics, "all new things for us."

The increase provides an additional $13 billion in "paid in" capital: $7.5 billion to the main institution and $5.5 billion to the bank's private financing arm, the International Finance Corporation (IFC). Kim said the increase will allow the bank to ramp up lending to an average of $100 billion a year through 2030, from $60 billion in 2017 and an expected $80 billion in 2018. Countries will have five years to provide the funds, but can ask for a three-year extension. The last increase occurred in 2010 and added $5 billion to the bank's capital and $200 million for the IFC. The United States, the institution's biggest shareholder, rejected the World Bank request in October and the administration of U.S. President Donald Trump has argued that multilateral lending institutions should graduate countries that have grown enough to finance their own development, like China. But U.S. Treasury Secretary Steven Mnuchin on Saturday said Washington supports the increase because of the reforms to lending rules. The increase requires legislative approval, but Mnuchin said he was hopeful Congress would back the plan. Kim also said he has had contact with representatives from both parties and received strong support. China's Vice Finance Minister Zhu Guangyao said Beijing supported increasing World Bank resources but had reservations about the agreement for changes in lending policies. And he noted that because of the capital increase, "we will be able to maintain volumes for middle income countries as a whole."

Zhu said the capital increase is "a concrete measure to support multilateralism" at a time when "anti-globalization sentiments, unilateralism, protectionism in trade" were creating uncertainties in the global economy.