World Bank recapitalization update - “New world – same World Bank”
The proposed capital increases for the World Bank and IFC would expand their size without expanding the scope of their reform
Bank Information Center | 8 March 2010
The World Bank is quietly pursuing a $55-$110 billion increase in the capital base of the IBRD and IDA, with a 25% increase request for IFC. In an Orwellian homage, the World Bank management has laid out its development vision for the next generation in a document entitled, New World, New World Bank Group: Post-Crisis Directions and Internal Reform Agenda. This brief provides an update of the World Bank Group (IBRD and IFC) capital increase request status and calls for an expansion of the scope for the Bank reform agenda. To date, the Bank has disclosed little documentation nor planned a consultation with civil society around the IBRD capital increase.
This BIC Info Brief provides an update of the World Bank Group (IBRD, IDA and IFC) capital increase request status and calls for an expansion of the scope for the Bank reform agenda. A minimal reform agenda for the Bank to qualify for any capital increase could include broad recommendations in four areas: 1) To be the knowledge Bank to which it aspires, the World Bank’s could strengthen its learning function, which involves strengthening the linkage between staff and management incentives with evidence based outcomes derived from reliable, independent monitoring and evaluation activities; 2) the Bank should outline specific energy strategy goals in the areas of renewables, efficiency, energy access and GHG accounting; 3) should the IFC merit a capital increase, the IFC Performance Standards and the Development Outcome Reporting System in particular should be strengthened, 4) the Bank should fully evaluate its experience with piloting country systems and produce a ten year plan that clearly benchmarks expected progress and links those objectives with associated changes in the governance and lending reform that is transparent and accountable.
Given the Bank’s recent approval of a new and improved disclosure policy, it is somewhat confounding to account for the surprising lack of transparency and accountability in the capital increase process. By diverting attention to the multiple policy reviews underway at the World Bank Group, President Zoellick has succeeded so far in preventing any transparency or consultation about the Bank’s capital increase request. Most worrisome about the lack of transparency is the probability that the scope of any reform agenda upon which a capital increase could be negotiated is well underway and could wrap up before the middle of March.
Why does the World Bank deserve more public money? As a once in a generation opportunity to reflect on the Bank’s core mission and the virtues of multilateral development cooperation, the capital increase request should provide unequivocal evidence that more money in the form of increased endowment of the World Bank will in fact do more good. This report suggests that such evidence is not reflected in the Bank's captital increase proposal.
An ongoing debate within the Bank about the Middle Income Country Agenda, country systems, investment lending reforms, Voice and Vote reforms, and related reforms also suggest pressure to loosen the safeguard policies for certain risk scenarios may have obscured the Bank’s core mission of poverty alleviation. As the Bank considers a new flexible lending instrument that could serve as something akin to an express lane pass moving low risk loans to preferred customers, the bright line that distinguishes the IBRD and World Bank from any other commercial bank begins to blur. The World Bank capital increase request should provide clear arguments that a bigger World Bank – the result of a capital increase - is clearly a better bank.
The capital increase proposal raises more questions about the vision and mechanics of poverty alleviation than it answers. Issues related to the Bank’s demand analysis, a narrow agenda for governance reforms, the decision to delink the capital increase from energy and climate policy or IFC Performance Standards review, an increasing reliance on instruments that have no safeguards, little attention to strengthening evaluation accountability and an uninspiring results matrix highlight the need for a transparent and meaningful public discussion prior to any capital increase decision.
READ THE BIC INFO BRIEF
New world – same World Bank: World Bank Group capital increase proposal expands the size without expanding the scope for reform by Vince McElhinny, Bank Information Center, March 8, 2010 (PDF, 761KB)
READ THE DRAFT WORLD BANK RECAPITALIZATION PROPOSAL
New World, New World Bank (I) Post Crisis Directions February 2, 2010 (PDF, 1 MB)
New World, New World Bank Group: (II) The Internal Reform AgendaFebruary 2, 2010(PDF, 2 MB)
Review of IBRD's Financial Capacity, Presentation to the Development Committee deputies meeting, February 19, 2010 (PDF, 1.9 MB)
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