More support for IMF funding boost without shareholding shift

Support increased on Wednesday for the US-backed call to increase International Monetary Fund quota lending resources without shareholding changes, according to statements from various countries issued at the IMF’s annual meeting in Morocco.

Britain, Ghana, Switzerland, Finland and Belgium said in statements to the IMF’s steering committee that they supported an equi-proportional increase, under which countries would contribute money in proportion to their current shareholding in the IMF.

Brazil’s finance minister, Fernando Haddad, who has pushed for an increase in shareholding for itself, China and other fast-growing emerging markets, said in a statement that Brazil would support such a quota increase if it were coupled to an “ad-hoc” share increase for the most “blatantly underrepresented” IMF members.

Better and Bigger: Meanwhile, the World Bank’s new president, Ajay Banga, said Wednesday that the global lender must become “better” and “bigger” to boost its capacity to help developing countries battle climate change, poverty and pandemics.

Banga, who was appointed in June, made his plea at the annual meetings of the IMF and World Bank in the southern Moroccan city of Marrakesh where reform of the Washington-based institutions is a major agenda item.

The former CEO of Mastercard has previously vowed to “fix the plumbing” at the bank, saying it was “dysfunctional” despite a dedicated staff.

Banga said at a press conference on Wednesday that a “deep cultural change” is needed at an “institution that has a proud history and done an amazing job over the last 78 years.” He noted that countries have to deal with various departments and that it can take 27 months between the time a project is discussed and is finally approved.

“The idea of a better bank is a bank that works better with itself, is more efficient in its own processes,” Banga said.

 The Indian-born, naturalised US citizen has vowed to made climate change a top priority after he took over from David Malpass, a former US Treasury official who stepped down early from his five-year term amid questions about his stance on the issue.

Banga wants to redefine the vision of the bank towards “eradicating poverty on a livable planet”.

He said poverty, pandemics and climate change were “almost like a perfect storm” that can no longer be treated separately.

The bank also needs more financial firepower, he said, adding that measures underway could boost its lending capacity by $150 billion over the next decade.

“It’s a substantial number, but it’s not going to be enough for the kinds of challenges the world has,” he said.

“There is no doubt that we need to be a bigger bank,” Banga said.

He cited an independent expert group commissioned by the G20, which recommended the tripling of financing of multilateral development banks.

“The G20 expert group has put out its own thinking on that. That has not yet been accepted by the G20,” Banga said.

“I’m definitely going to go back to our shareholders to seek a bigger bank because I believe that is what the world needs for the next coming decades,” he said.

US President Joe Biden has asked Congress for support to unlock concessional financing for the World Bank, which Treasury Secretary Janet Yellen said could amount to $27 billion.

But work in Congress is being held up as Republicans look for a new House speaker following the ouster of Kevin McCarthy by hardliners last week.

Banga, however, said he was “hopeful” that Congress would approve the measure.

“There are plenty of people on both sides of the House, as well as both sides of the Senate, who understand the value of multilateral banking system as a key to way for the Western and developed world to continue to do the right thing around the world,” he said.

Other countries such as Germany have contributed while Nordic nations and Saudi Arabia are discussing ways to contribute through various instruments, he said.

Yellen said at a separate press conference that she would ask other countries to provide immediate concessional finance for the World Bank.

Separately, the US and China will both need to make major changes to put their medium-term debt and deficit on a sustainable path, International Monetary Fund Fiscal Affairs Director Vitor Gaspar said on Wednesday.

Continuing along their projected fiscal paths will ultimately cause difficulties for the world’s two largest economies, Gaspar told Reuters in an interview.

The US and China are fueling a projected return to higher debt levels after two years of falling debt-to-GDP ratios as a post-COVID growth surge fades.