World Bank Expands Voting Power of Emerging Economies
Washington - Members of the World Bank have agreed to expand the voting power of emerging economies, boost the bank's operating capital and adopt a reform package that calls for more openness.
"The change in voting power helps us better reflect the realities of a new multipolar global economy where developing countries are now key global players," World Bank President Robert Zoellick said April 25 in a post-meeting press conference.
The International Monetary Fund (IMF) and the World Bank held their annual spring meetings in Washington April 24-25, and the Group of 20 finance ministers and labor ministers held meetings in advance.
The decision to increase the voting power of developing and transition economies will give them a 47.19 percent share in decisionmaking. The United States continues to hold the largest share at 15.85 percent, Japan is at 6.84 percent and China has moved into third place with a share of 4.42 percent. The move also strengthens the positions of Brazil, India, Indonesia and Vietnam.
"The new formula will better reflect the weight of the developing and transition countries in the global economy, while protecting the voice of the smallest and poorest countries," U.S. Treasury Secretary Timothy Geithner said April 25. He added that the United States did not seek to increase its share.
"Because we believe this overall outcome merits our strong endorsement, the United States agreed not to take up its full shareholding in this new arrangement," Geithner said.
The bank members also agreed to a series of reforms to provide greater openness and the disclosure of financial information, strengthened risk management, and strengthened governance and anti-corruption efforts.
INCREASE IN OPERATING CAPITAL
The 186 members of the World Bank also agreed to an increase of $86.2 billion in operating capital for the International Bank for Reconstruction and Development (IBRD), the arm that lends to developing countries. This increase would bring the bank's total capital to approximately $276.1 billion, not including about $26 billion held in reserves.
"We are grateful to our shareholding countries for this strong vote of confidence," Zoellick said. "This extra capital can be deployed to create jobs and protect the most vulnerable through investments in infrastructure, small and medium-sized enterprises, and safety nets."
Geithner praised the World Bank action, saying that Zoellick "made a strong and compelling case" for the new capital infusion. The United States' share amounts to $586 million over a five-year period, or approximately $117 million a year.
"We have agreed this week to seek our share of this funding from our Congress," he said. "The additional capital we have agreed to seek will enable the bank to sustain its critical work on its four core missions."
Given strained economic times, Geithner said, it is imperative that the value of the contributions is matched by the value of World Bank investments. "For every dollar the United States contributes to paid-in capital for the World Bank, $26 worth of assistance is delivered," he said.
POVERTY REDUCTION
The expanded capital for the bank comes at a critical time, according to the Global Monitoring Report for 2010, released by the bank April 23. The report said the global economic crisis has slowed the pace of poverty reduction in developing countries and is hampering progress toward meeting development goals.
The impact of the crisis is being felt in significant areas of concern - hunger, child and maternal health, gender equality, access to clean water, and disease control, the annual report said.
"As a result of the crisis, 53 million more people will remain in extreme poverty by 2015 than otherwise would have," the World Bank said in a statement. "Even so, the report projects that the number of extreme poor could total around 920 million five years from now, marking a significant decline from the 1.8 billion people living in extreme poverty in 1990."
However, the report also acknowledged that the combination of a food price crisis and the financial crisis that hit in 2008 has played a role in exacerbating hunger in the developing world.
GLOBAL ECONOMY RECOVERING
Youssef Boutros-Ghali, chairman of the IMF's International Monetary and Financial Committee, said the global economy is recovering, but "the worst is definitely not behind us."
"We see a strengthening of economic recovery, but we also see an unevenness in this recovery, unevenness within countries and unevenness between countries," he said.
In a number of instances, Boutros-Ghali said, early indications are that the recovery is not yet sustainable and is still dependent on government-sponsored fiscal measures. He acknowledged that things remain most difficult for low-income countries and the world's poorest.
IMF Managing Director Dominique Strauss-Kahn said the world economy has entered the fourth phase of the crisis - the rebuilding phase. But he cautioned that global unemployment remains high, financial activity is still being propped up by accommodative policies, and the financial sector still requires regulatory reform.
