World Bank seeks more funds to address climate change, other crises -document
The World Bank is seeking to vastly expand its lending capacity to address climate change and other global crises and will negotiate with shareholders ahead of April meetings on proposals that…

WASHINGTON, Jan 2 (Reuters) - The World Bank is seeking
to vastly expand its lending capacity to address climate change
and other global crises and will negotiate with shareholders
ahead of April meetings on proposals that include a capital
increase and new lending tools, according to an "evolution
roadmap" seen by Reuters on Monday. The roadmap document - sent to shareholder governments -
marks the start of a negotiation process to alter the bank's
mission and financial resources and shift it away from a
country- and project-specific lending model used since its
creation at the end of World War Two. The World Bank management aims to have specific proposals to
change its mission, operating model and financial capacity ready
for approval by the joint World Bank and International Monetary
Fund Development Committee in October, according to the
document. 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. The reform of multilateral development banks was a topic of
fierce debate in recent months after developing countries faced
mounting pressure from inflation, energy and food shortages
fueled by Russia's war in Ukraine, slowing growth, mounting debt
burdens and growing vulnerability to climate shocks. The pressures laid bare the inadequacy of the World Bank
and International Monetary Fund's (IMF) structures - designed at
the end of World War Two to focus on rebuilding peacetime
economies - to deal with current global calamities. AAA RATING TO STAY The development lender will explore options like a potential
new capital increase, changes to its capital structure to unlock
more lending and new financing tools such as guarantees for
private sector loans and other ways to mobilize more private
capital, according to the document. But the World Bank Group (WBG) is not ready to bow to
demands from some non-profit organizations 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." U.S. 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. A U.S. Treasury spokesperson declined comment on the World
Bank document. A spokesperson for Britain's foreign office said the UK
"strongly supports" the World Bank proposals to explore all
options to further increase support to developing and emerging
economies. The bank said proposals under consideration include higher
statutory lending limits, lower equity-to-loan requirements and
the use of callable capital - money pledged but not paid in by
member governments - for lending. Development experts say this shift would greatly increase
the amount of lending compared to the current capital structure,
which only utilizes 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
development and climate finance, it will need a concerted effort
by both shareholders and management to step up WBG financing
capacity." INADEQUATE FUNDING The roadmap document cautions that a build-up of lending for
climate change, health care, food security and other needs may
require a capital increase to boost the capacity of the World
Bank's middle-income lending arm, the International Bank for
Reconstruction and Development (IBRD). IBRD's $13 billion capital increase in 2018 "was designed to
be prepared for one mid-sized crisis a decade, and not multiple,
overlapping crises" including the COVID-19 pandemic, the war in
Ukraine and the effects of accelerating climate change, the
document said. IBRD's crisis buffers will likely be depleted by
mid-2023, it said. Another option, according to the roadmap, is for World Bank
shareholder countries to step up periodic contributions to the
lender's fund for the world's poorest countries, the
International Development Association (IDA), which have declined
in recent years despite increasing needs. The roadmap also offers the option of creating a new
concessional lending trust fund for middle-income countries that
would focus on global public goods and be similar in structure
to IDA, with regular funding replenishments that would be
separate from the bank's capital structure. "Such a fund may attract donor bilateral resources separate
from shareholder budget lines supporting the WBG, and
potentially include donors beyond shareholders," such as private
foundations, the bank said. But environmental campaign group Friends of the Earth said
the proposal did not go far enough and World Bank shareholders
needed to ensure the lender was not "part of the problem". "A true evolutionary roadmap must commit to ending financing
for fossil fuels, industrial animal agriculture, petrochemical
infrastructure, corporate-friendly false solutions, and harmful
activities in biodiverse areas," Luisa Abbott Galvao, Senior
International Policy Campaigner for Friends of the Earth, said
in an emailed statement. The World Bank also said that the evolution of its mission
to increase climate lending while maintaining good development
outcomes will require additional staff and budget resources,
which have declined 3% in real terms over the past 15 years.
(Reporting by David Lawder; additional reporting by David
Milliken in London, additional writing by Karin Strohecker,
editing by Grant McCool)