World Bank Changing Rules, Fees to Commit 50% More MoneySandrine Rastello
The World Bank, the international organization that’s trying to end extreme poverty by 2030, is changing lending rules and increasing some fees under a plan to boost the money it commits annually by about 50 percent.
“The world’s development needs, of course, far outstrip the World Bank’s abilities to address them. But we can do much, much more,” World Bank President Jim Yong Kim said in prepared remarks today to the Council on Foreign Relations in Washington.
“In order to meet the increased demand that we are expecting as we get better at delivering knowledge and solutions to our clients, we’re strengthening our financial capability to scale up our revenue and stretch our capital,” he said.
The changes are part of Kim’s push to transform a Washington-based institution he said had grown too fragmented and cautious to accomplish its poverty-ending goal. At the same time, Kim is seeking to trim annual expenses by $400 million, which he told reporters yesterday will translate into “a smaller bank over time.”
Kim, the former president of Dartmouth College in Hanover, New Hampshire, said he wants to increase the loans, guarantees and investments the bank makes to about $70 billion a year, from $45 billion to $50 billion currently. Commitments reached $52.6 billion in the fiscal year ended June 30.
To get there, the unit that lends to middle-income governments will revise its equity-to-loan ratio, introduce new maturities and charge a fee on funds that are not disbursed, the bank said in a separate statement. It will raise the borrowing limits by $2.5 billion for five countries including China and India, according to the statement.
“We’re now able to continue to remain engaged,” Kim told reporters about changes to the borrowing limits. “This is an extremely positive sign for us, in the sense that, even the largest middle-income countries, China, India, Brazil continue to want to do business with us.”
The changes will enable the unit, called the International Bank for Reconstruction and Development, to boost lending to $28 billion a year, from $15 billion, Kim said. Over the next 10 years the amount of loans the unit can carry on its balance sheet will grow by $100 billion to reach $300 billion, he said.
The other units will also commit more funds, he said. The political risk-insurance arm will increase new guarantees by almost 50 percent in the next four years, Kim said. The private-sector division, which gives loans and makes direct investments, expects to double its portfolio over the next decade, he said.
“We’re not walking into this with any kind of set numbers in our heads of people that we need to cut,” Kim said on efforts to reduce spending. “We’re doing it to make sure that we are as lean as possible and ready for the kind of growth that we expect and demand for our services.”