World Bank ‘must strengthen flow of development finance’

20 Apr 12
Developing and emerging market countries have called on the World Bank and its shareholders to take action to ensure it can lend enough money to support their long-term development needs.

By Nick Mann | 20 April 2012

Developing and emerging market countries have called on the World Bank and its shareholders to take action to ensure it can lend enough money to support their long-term development needs.

The Intergovernmental Group of 24 on International Monetary Affairs and Development said the Bank needed to strengthen the flow of development finance by finding ‘new solutions’ to lending money.

‘We are concerned that World Bank lending is projected to decline at this crucial juncture because of constrained financial capacity,’ a statement issued by the group at the International Monetary Fund and World Bank spring meetings in Washington DC said.

The bank’s member countries should consider whether the capital they put into the bank is sufficient, they said, and it should also ‘improve its responsiveness through more flexible and innovative policies and instruments’.

In February 2012, the Bank approved a programme-for-results instrument, which involves funding payments being directly linked to a development programme’s performance. This was the ‘first step in that direction’, they said.

At the same time, the IMF was urged to be ready to respond to the additional financing needs of low-income countries, particularly those relating to rising energy prices.

‘We call for increased efforts to mobilise donor support and for an early discussion by the IMF on how to meet longer-term financing needs to ensure that there is no gap in needed financing,’ they said.

Moves to increase the IMF’s lending capacity to address the economic crisis were also welcomed. The G24 agreed that these should be rooted in the quota system, subject to scheduled reforms at the IMF taking place. Currently the system gives advanced economies a larger share of the vote on funding decisions.

‘Efforts to strengthen the IMF’s lending capacity must not undermine its character as a quota-based institution and must be anchored in a firm commitment to governance reform,’ they said.

In a separate statement, a group of nine Latin American and Caribbean countries led by Brazil criticised the ‘limited and slow’ pace of quota and voting reform in the IMF.

The group’s statement, issued as part of preparations for a meeting tomorrow of the IMF’s International Monetary and Finance Committee, said: ‘We are deeply concerned about the slow implementation of the 2010 quota and governance reforms.’ Reforms agreed in 2010 should come into force in September 2012, but are still ‘very far’ from being finalised.

‘The reluctance that some countries are demonstrating in following through with the agreements we have on the comprehensive review of the formula is deeply damaging to this institution and to these countries’ own credibility,’ they said.

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