India today asked the World Bank to increase its developmental fund to USD 100 billion a year from the existing USD 50-60 billion and called for enhancing...
India today asked the World Bank to increase its developmental fund to USD 100 billion a year from the existing USD 50-60 billion and called for enhancing the share and voice of developing nations in the management of institutions providing assistance under it.
The World Bank provides developmental assistance through International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA) and the International Finance Corporation (IFC).
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“These three institutions provide approximately USD 50-60 billion per annum in concessional, non-concessional and private sector resources,” Finance Minister Arun Jaitley said in his address to the Development Committee of the World Bank.
“Within next five years, we should work to raise annual financing volumes from the World Bank Group to USD 100 billion a year,” said Jaitley, who is here to attend the annual Spring Meeting of the International Monetary Fund and the World Bank.
“This would be a kind of minimum contribution from the Bank Group for the developing countries, in their task of bringing about development and finance reconstruction,” he said.
Observing that the World Bank is highly capital constrained, Jaitley said the IFC has no space to invest today even at low level volumes it has been doing for some years.
IBRD would not be able to maintain lending levels of even USD 20 billion per annum in two years’ time, he said.
To better reflect the increasing weight of Developing and Transition Countries (DTCs), their share and voice in the management of these institutions also needs to grow, Jaitley asserted.
“We should therefore plan to have a Selective Capital Increase (SCI) to raise Developing and Transition Countries (DTCs’) voting share to 50 per cent and a large general capital increase in IBRD and IFC for being able to finance USD 100 billion per annum going forward,” he said.
Jaitley stressed that the time has come for raising partnership of DTCs in the IBRD and IFC to 50 per cent.
This would require that the economic weight captured by GDP remain the primary factor in the formula, with share of purchasing power parity (PPP) based GDP of not less than 60 per cent.
IDA has enormously useful role in financing development in low income countries, but recognising IDA contributions in IBRD/IFC share capital has adverse impact on voting share of developing countries, he observed.
Therefore, it would be more than fair if a weight of not more than 10 per cent is given to IDA contributions in the dynamic formula, Jaitley said.
Such a weight should also recognise only recent contributions to act as rightful incentive for the emerging countries to contribute in IDA and should also recognise a multiplier based on burden share and generosity, he added.
“The formulation we have suggested is equitable, and recognises all contributions equally in accordance with capacity of each donor. We must also not lose sight of the fact that while there may be losers or gainers today, our collective negotiating power must be deployed to ensure a fair formula rather than to minimise losses and maximise gains in the current round,” Jaitley said.
“Once we have a fair formula, future shareholdings will automatically reflect the relative economic positions of the country in the interest of all shareholders,” he said.