David Malpass: World Bank can lend 'up to' $50B more over next decade

The World Bank will be able to lend “up to” $50 billion more over the next decade, bank President David Malpass said, as key shareholders push for increased spending to fight poverty and tackle major global challenges such as climate change. The amount is an increase over a previous figure he gave of $40 billion in extra funding over the same period. People with knowledge of discussions inside the bank tell Devex the final number is a “moving target” until the board issues a decision. That will likely come during the institution’s Spring Meetings in Washington on April 10-16. “Development needs have increased dramatically and so should development finance,” Malpass said in a speech Thursday during a visit to Niger. Why it matters: U.S. Treasury Secretary Janet Yellen said this week that she wants to see the bank stretch its existing resources as much as possible before considering other options to increase its lending capacity. Yellen, who has spearheaded a reform effort to modernize the 78-year-old bank, also said the Biden administration is not “at this time” seeking a capital increase or additional money from shareholders so that the institution can lend more. How the increase works: The bank is trying to squeeze out additional lending to lower-income nations without going so far that it hurts its top-level AAA credit rating. This rating allows the bank to borrow cheaply on markets and pass on the low rates to countries that would otherwise pay high-interest costs. Of the major development banks, the Washington-based institution is already the most leveraged, meaning it makes the most loans relative to the amount of equity it has in its treasury. Sources said the bank has always tried to give itself a cushion with the ratings agencies but is now looking at pushing the limits, as shareholders demand more annual lending Go deeper: In his speech, Malpass laid out a stark situation that demands more financial resources. The global extreme poverty rate rose since the COVID-19 pandemic from 8.4% to 9.3%, “the first recorded increase” since record-keeping began. Climate is also a huge concern, he said. “Climate change is causing widespread costs, with the most vulnerable people and systems bearing the brunt,” Malpass said. “Adaptation is a top priority for developing countries,” he added in a nod to repeated pleas from many lower-income nations for the global system to help finance investments in measures to cope with increasing droughts and floods as the climate changes. What’s next: Bank shareholders are divided over climate finance, which will be a key point of contention during the Spring Meetings. Higher-income nations have largely prioritized climate mitigation, which is about spending on reducing emissions. But lower-income countries are the smallest emitters and feel this focus ignores their needs and they prefer an adaptation focus.