Strengthening the World Bank

It seems that world financial managers are prepared to assign more potent role to the World Bank and increase its lending resources accordingly. At the latest annual meetings of the IMF and the World Bank in Istanbul, finance and development ministers around the globe pledged to ensure that the World Bank had enough money to fight poverty, climate change and other challenges facing developing countries.
The Development Committee of the Bretton Woods' twin institutions called on the Bank to provide the member countries with an assessment of its capital needs by spring 2010 in order to let them decide how best to meet that goal. The communiqué issued at the end of the Committee's meeting included a commitment to "ensure that the (World Bank) had sufficient resources to meet future development needs." The Bank has proposed a capital increase of between $3 billion and $5 billion and if approved, it would be the first general capital increase for the global lender in 20 years.
The US, Nordic countries, the Netherlands, Australia and India voiced support for capital increase while France, Britain and Italy said that they were not entirely convinced because World Bank's existing resources were still adequate for the purpose. The Development Committee also backed a proposal by the Group of 20 developed and emerging economies to shift voting power in the World Bank by at least 3 percent to developing countries to give them more say in the working of the institution. Its communiqué emphasised that the proposal was aimed to "move towards equitable voting power in the World Bank over time."
There seems to be no doubt that Istanbul meetings have been particularly good for the developing countries in general and the World Bank in particular. It is good to see that the role of the World Bank has been appreciated and most of its developed member countries are prepared to support it financially to help extend its activities, even at a time when they themselves are facing hard times.
The World Bank needs the resources because lending to fast-growing emerging countries has tripled since the beginning of the global financial crisis as it threw lifelines to governments facing collapsing revenues and a drop in private capital inflows. Lending to middle-income countries could also reach a record level of $40 billion this year, up from $33 billion last year. As a result, the globe's premier development lender could face serious financing constraints by the middle of next year. Hopefully, its capital base would be enhanced and other resources would be mobilised in time to meet its growing lending requirements.
Fortunately, countries like France and Britain have not opposed the capital increase because they differ on the issue in principle but only due to the adequate level of resources still at the disposal of the World Bank. We feel that they will also agree to the viewpoint of other member countries to replenish the resources of the World Bank when the existing resources of the institution are found to be insufficient to meet its lending requirements. No need to say that a move towards increasing the voting power of the developing countries is highly welcome. Hopefully, the proposal of the Development Committee in this respect would set in motion the required process at an early date.
While the world desperately needs structures of international co-operation like the World Bank to preserve the form and spirit of the post-war economic order, it would be naïve to think that World Bank is a perfect institution. Judging by various yardsticks, it is considered to be a monolithic and overstaffed organisation, supervised generally by an outdated bureaucracy. There is a need to make it lean and more efficient. Also, the right of the US to nominate its President is being increasingly challenged and rightly so.
This does not mean that Presidents of the World Bank were not up to the mark or lacked leadership qualities but such a right indicates a kind of monopolistic approach that smacks of imperialism. It needs to be mentioned that wider acceptance and legitimacy is an essential precondition for effectiveness. Besides, there is a need for all the multilateral financial institutions, including the World Bank, for a better co-ordination in order to avoid duplication of work.
Presently, their country studies generally look like copies of each other, with minor changes to indicate the difference in source. Nevertheless, we need to recognise the contributions of the World Bank to improve the economic conditions in the developing countries and would urge the rich nations to play an increasing role to supplement its resources for the benefit of their less fortunate contemporaries.