New Delhi: US President Joe Biden is leading a “major new initiative” with G20 partners to “reshape and scale up” the World Bank, the White House announced in a statement Saturday.
“President Biden is leading a major new initiative with G20 partners to fundamentally reshape and scale up the World Bank to more effectively deliver poverty reduction and inclusive economic growth — while better addressing global challenges that can undermine the achievement of these very goals,” the statement said.
It further highlighted that the Biden-Harris (US Vice-President Kamala Harris) administration first launched the initiative to reshape the World Bank last fall (autumn 2022), and that “significant progress” has been made since.
“With measures implemented and identified under the G20’s Capital Adequacy Review, the multilateral development bank system could unlock $200 billion in new lending capacity over the next decade,” the statement further read.
In June this year, new president of the World Bank Group Ajay Banga had called for a “better bank” before pushing countries for an increase in capital, according to a Reuters report. Banga went a step further, seeking to amend the Group’s mission statement to focus on eliminating poverty “on a liveable planet”, thereby codifying its expanded role to include climate change.
The current mission statement of the Group, according to the World Bank website, is: “End extreme poverty within a generation and boost shared prosperity.”
Reform of Multilateral Development Banks (MDBs) — the World Bank Group is an MDB — and international financial institutions has been one of the goals of the G20 under India’s presidency. The G20 New Delhi Leaders’ Declaration, adopted Saturday, has a subchapter on the same.
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Reforming international financial institutions
The G20 New Delhi Leaders’ Declaration calls for an “international development finance system” that is fit for purpose, including for the “scale of need and depth” required to face the shocks developing countries face.
“Stronger MDBs will be important to our efforts [G20 member states] to mobilise financing from all sources for a quantum jump from billions to trillions of dollars for development,” the declaration said.
The G20 leaders endorsed the G20 Roadmap for Implementing the Recommendations of the G20 Independent Review of MDBs Capital Adequacy Frameworks (CAF). The review developed and published in July 2023, by the Indian presidency, was based on the mandate from the G20 summit in Bali in November 2022.
The independent review offers forward-looking G20 guidance on how to pace up the implementation of the recommendations, which are voluntary and subject to each MDB’s governance framework.
“Therefore, we are exploring options that will deliver a powerful boost to [International Bank for Reconstruction and Development] IBRD headroom, reduce the cost of investments addressing global challenges, and increase the capacity of the IDA crisis response window,” the declaration added.
Biden seeks Congress approval for additional funds
As a part of the efforts to reshape and scale up the World Bank, Biden has asked the US Congress for funding to unlock $25 billion in new International Bank for Reconstruction and Development (IBRD) concessional lending capacity, the statement said.
This could provide borrowers with more headroom to “address global challenges”, and enable the World Bank Group to better support developing countries, the statement explained. “This new lending capacity will enable the World Bank to better support developing countries by providing more resources on better terms, and helping countries pursue more ambitious reforms and development projects with regional and global benefits.”
Biden has also sought $1 billion from the US Congress as a contribution to support the International Development Association’s (IDA’s) immediate crisis response in the world’s poorest countries. Established in 1960, the IDA is a part of the World Bank Group and aims to reduce poverty by providing zero to low-interest loans and grants for programmes that boost economic growth, reduce inequalities, and improve people’s living qualities, according to its website.
In August, Biden requested the US Congress for $3.3 billion in additional funding as a part of supplementary budget request in an attempt to offer countries a ‘credible alternative to the People’s Republic of China’s coercive and unsustainable lending and infrastructure projects,’ according to media reports.
Biden rallied G20 partners on concessional funding
The statement from the White House stated that Biden rallied the G20 partners to, “agree to collectively mobilize more headroom and concessional finance to boost the World Bank’s capacity to support low- and middle-income countries”.
The aim, the statement adds, is through “joint contributions” to provide a one-time boost of funding to the IBRD equivalent to three times the World Bank’s annual “non-concessional lending volume” and “double” the IDA’s crisis lending capacity.
Earlier during the ASEAN-UN Summit held on 7 September, United Nations Secretary-General António Guterres had urged the members of the G20 to reform the international financial architecture and to create conditions for debt relief and access to long-term concessional funding to help developing countries overcome the COVID-19 pandemic and the war in Ukraine, as reported by ThePrint earlier.
“President Biden will continue to call on G20 Leaders to commit to further progress on evolving the World Bank and other multilateral development banks over the next year, and he will push for concrete results by the Rio de Janeiro Summit under Brazil’s G20 Presidency in 2024,” the White House statement said.
(Edited by Gitanjali Das)