Leveraging the World Bank’s Capital Increase
With multilateralism under attack by populists and nationalists around the world, the recently approved $13 billion capital boost for the World Bank Group is a welcome development. But it will backfire politically unless the additional capital is used to mobilize more private-sector financing of global development goals.
PARIS – In April, governments from around the world agreed to a $13 billion capital increase for the World Bank Group, sending a clear signal that multilateralism is far from dead. The additional funding will strengthen the WBG’s capacity to support development projects around the world. But it also raises critical questions about how best to deploy the new funds and raise public capital in the future.
Meeting the 2030 United Nations Sustainable Development Goals (SDGs), as well as the WBG’s own goal of taking development finance from “from billions to trillions,” requires maximizing the potential of the latest capital increase. And to do that will require building a new architecture for development finance, so that a multitude of actors operating with limited resources have incentives to optimize performance, pursue joint action, and avoid duplicating one another’s efforts.
A new framework will force all stakeholders – including the WBG, regional development banks, bilateral agencies, the European Investment Bank (EIB), and other institutions – to reexamine their role in the larger system. We know from past experience that by strengthening the WBG, the use of public and private capital in development finance could become more fragmented. To avoid that outcome, we need a system that motivates diverse parties to work together transparently.