Daily Management Review

Yellen Opposes A World Bank Capital Increase; The U.S. Nomination For The International Lender Has No Challengers


Yellen Opposes A World Bank Capital Increase; The U.S. Nomination For The International Lender Has No Challengers
With no rivals appearing as the nomination period came to an end, U.S. Treasury Secretary Janet Yellen on Wednesday dismissed the notion of a short-term capital boost for the World Bank and stated that she anticipated U.S. nominee Ajay Banga to be elected as the bank's next chairman.
According to Yellen, the World Bank should changes to greatly increase lending to combat climate change and other global crises. This would be accomplished, in large part, by maximizing the bank's current resources, implementing creative financing strategies, and leveraging private capital.
The World Bank's January plans included a capital increase. Without the backing of the United States, the World Bank's largest shareholder, it would not be conceivable.
"We are not requesting a capital increase," Yellen said during a budget hearing of the U.S. House of Representatives Appropriations Subcommittee on State, Foreign Operations, and Related Programs. "We do want to see better mobilization of private resources alongside World Bank investments as well, but we're not requesting a capital increase at this time."
The World Bank announced the proposed capital increase as part of its evolution road map to meet the challenge that Yellen outlined last year to broaden the scope of its mission beyond lending for country-specific development initiatives to address global crises. Nevertheless, a capital increase would require enormous contributions from the United States to maintain its ownership in the bank, which would conflict with House Republicans' demands for expenditure reductions in exchange for lifting the U.S. federal debt ceiling.
The World Bank's most recent capital boost of $13 billion was approved by member nations in 2018, however the COVID-19 pandemic and its effects on financing have put a strain on it.
The World Bank's current evolution plan was created by David Malpass, the organization's outgoing president, who was appointed by former President Donald Trump and resigned in February after initially refusing to declare his support for the scientific consensus on climate change.
In February, Malpass told Reuters that loan ratio changes may free up an extra $4 billion in yearly lending capacity, or $40 billion over a ten-year period. This is a much lower amount than the hundreds of billions of dollars that a G20 report suggested was achievable.
In order to increase loans for climate change, Yellen has already urged the World Bank to pursue "bolder and more inventive" actions.
Banga, the former CEO of MasterCard who has been nominated by President Joe Biden, is likely to get that plan soon.
The World Bank completed the nomination period for its new president on Wednesday without announcing any candidates in addition to Banga. On Thursday, the bank's board is anticipated to announce the following steps in the hiring process with the goal of naming a new CEO by early May.
Yellen informed lawmakers that she anticipates Banga would be chosen to lead the World Bank and that she will be tasked with modernizing the organization to better address "21st century concerns" like climate change, pandemics, war, and fragility.
A number of foreign nations, including those from Bangladesh, Britain, Colombia, Egypt, France, Germany, India, Italy, Ivory Coast, Japan, Kenya, Saudi Arabia, and South Korea, have already expressed support for Banga, 63, who was born and raised in India but is now a citizen of the United States.
On Wednesday, Yellen also stated that the United States' stance toward energy financing from multilateral development banks is flexible and that some low-income countries may be eligible for financing for natural gas projects if renewable energy sources are not practical.