US to back $13bn WB capital increase

WASHINGTON: The Trump administration is expected to support a $13 billion capital increase for the World Bank (WB) in a deal that will reform the development bank’s lending rules and increase China’s shareholding, three people close to the matter said on Friday.
US Treasury Secretary Steven Mnuchin is expected to lend his support for the plan at next week’s World Bank and International Monetary Fund spring meetings, the sources said.
But the deal will need an endorsement from the World Bank’s shareholders and approval from its board of directors.
“Barring unforeseen challenges, there will be a capital increase,” one of the sources said. US backing for the capital increase was first reported by the Financial Times.
The Trump administration was initially sceptical of the World Bank’s long-running effort to boost its capital, proposing major cuts to multilateral development banks last year.
US Treasury Undersecretary David Malpass has long criticized multilateral development banks for contributing to the build-up of debt in poor countries, and has chided the World Bank’s lending to higher income countries such as China, saying they should “graduate” to non-concessional loans.
“When the World Bank does not graduate these countries, less funding is available to reach countries with greater development needs and there is an excess burden placed on shareholder capital,” Malpass, who heads international affairs at the Treasury, said in congressional testimony last year.
The sources said it would include reforms that would raise financing costs for higher-income countries.
— Reuters