US twists Word Bank arm seeking to overhaul lending to biggest borrower ChinaWorld | 13 Oct 2017 10:01 am
The Trump administration is resisting plans to increase funding for the World Bank, which has asked for more capital to lend, until it overhauls its lending to China and other middle income countries, the Financial Times reports.
China, which has trillions of foreign reserves, has become the largest borrower from the World Bank. It has top investment grade ratings.
China is IBRD’s largest borrower country, with US$2.42 billion in loan commitments in the fiscal year ended June 30. The other top 10 borrowers were India, Indonesia, Colombia, Argentina, Egypt, Iraq, Turkey, Ukraine and Romania.
China is the World Bank Group’s third-largest shareholder, with 4.77 percent of voting power.
But China also controls 28.7 percent of the new Beijing-based Asian Infrastructure Investment Bank, which has US$20 billion in paid-in capital, exceeding the World Bank’s US$16 billion, Reuters has reported.
Jim Yong Kim, the Korean who heads the World Bank, has been pushing for extra financial resources and had hoped that shareholders would agree on at least a timetable for the increase at this week’s annual meetings in Washington. (Pictured, President Xi Jinping and Premier Li Keqiang)
But the Trump administration has been resisting those plans and this week aired its demands, saying it wanted the World Bank to examine its own balance sheet first and in particular its lending to China, the FT reports.
But Kim defended the bank’s lending to China, saying yesterday, that its engagement there informed the bank’s work across the world. "For me the rationale for us working in China is quite clear: Not only are we helping them along the development path but the lessons we learn in China . . . are very helpful to our work in other developing countries,” he told reporters.
The World Bank, he said, needed a capital increase to respond to growing demand for its loans, acknowledging a decision was now in the hands of its shareholders. "The good news is the US is now very much part of the discussion,” he said.
A senior US Treasury officials told Reuters this week that the World Bank needed to do "substantial work” on its balance sheet before Washington would entertain the idea of a capital increase for its main lending arm, the International Bank for Reconstruction and Development. "The bottom line here is right now we’ve got too high a percentage of the World Bank’s balance sheet that’s going to countries and to projects that already have ample borrowing capacity,” the official said, the FT reports. -The Standard