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Home / US / White House shelves skepticism, back funding increase for World Bank

White House shelves skepticism, back funding increase for World Bank



WASHINGTON: The Trump government supports a $ 13 billion increase in World Bank funding, setting aside its skepticism about the large government-led institutions that govern the world economy, in part because it wants the World Bank to counter China growing international influence.

The change that will allow the bank to lend to clients from poor countries comes after what European and other officials described as tough negotiations on harsh conditions. touch and go, "and many doubted that it would happen.

US Treasury Secretary

Steven Mnuchin

Banks could shift funds to poorer borrowers and from countries that are better able to finance their own development goals.

"There are reforms that they are making, which we consider quite significant along with the increased funding request," Mr. Mnuchin said at a news conference.

The injection of capital could help make China a stronger counterweight to China. Lending, including from Beijing-led Asian Infrastructure Investment Bank, which is growing strongly.

President

Donald Trump

has repeatedly signaled a suspicion of multilateral institutions and initiatives, including the World Trade Organization, which seeks to resolve disputes in world trade.

The US Treasury Department sharply criticized the bank. The World Bank wanted to push ahead with the surge last year, but the US blocked the discussion and shifted the discussion to 201

8. The US is the only country with veto power over any changes in banking structure, so funding will not be possible without Washington's support [DavidMalpassUnderSecretaryofStateforInternationalAffairsoftheMinistryofFinancesaidinCongressinNovemberthattheroleofmultilateraldevelopmentbanksincludingtheWorldBankmust"changedramatically"andhave"majorproblems"withcountriesthatcontinuetoborrowWorldBankIncomefromChinaIssue

The shift to US support for more bank funding has surprised some European governments, said Suma Chakrabarti, President of the European Bank for Reconstruction and Development in London multilateral bank lending in E urope, the Middle East and North Africa. He said in an interview on Thursday that the capital increase was "very good news" as it would help reduce global poverty.

US support was conditional. The growth of World Bank salaries is limited. Amendments will change lending for countries classified as upper and middle income, which are currently defined as countries with per capita income between approximately $ 4,000 and $ 12,000. Countries that receive loans from the World Bank "graduate" to less subsidized loans as their incomes rise, and in the new round of changes, these rates will rise faster and such countries will graduate faster.

"We will lend more over time to lower-income countries," World Bank President

Jim Yong Kim

said at a press conference this week, specifying that "there is nothing in the agreement that targets a particular country."

Other nations in the upper middle income bracket include Brazil, Argentina and Turkey. Although countries can borrow less as they get richer, their votes in the World Bank will also increase under the proposal, which may be seen as a sign of progress by officials there.

"It is useful for Argentina to get access to the loan portfolio from the World Bank, but if the international community says that Argentina has graduated, that means something good has happened in Argentina"

Nicolás Dujovne,

the Minister of Finance of Argentina, said on Wednesday. He added, "We would prefer to increase lending and get more money from the World Bank."

Mr. Mnuchin said he would work with Congress to obtain approval for the US contribution, a move that has proved difficult in the past. After the Obama administration agreed to increase IMF funding in 2010, it took five years to win Congressional support.

"No member of Congress fights at home for a World Bank capital increase," said Scott Morris, a senior fellow at the Center for Global Development, an international think tank. "They do not do it zealously, it takes some persuasion."

The US has changed its international approach again, calling for the need to oppose China. The Trump government's first budget proposed that Overseas Private Investment Corp. companies that invest in emerging markets, provide financing and political risk insurance. In this year's budget, the budget was increased by proposing an increase in OPIC funds and by supporting legislation that would give OPIC a broader investment power.

"There is a lack of modern 21st century mechanisms to compete with countries like China or to collaborate with allies such as the United Kingdom, Germany and Japan, which invest heavily in emerging markets," OPIC President

Ray Washburne

(19659004) In both cases, the government had an initial impetus to resolve, but changed course after realizing that China would fill a gap if the US withdrew.

The US is the largest and most influential shareholder in the World Bank and the IMF, and was the principal architect of both institutions created after World War II.

"The US Government comes to multilateral institutions with a high degree of skepticism" the Ministry of Finance

Philip Hammond

(19659004) He said it was up to countries like Britain and others to convince Washington that strengthening the multilateral institutions underpinned the international system and benefited the US

"I think we are all very pleased with the US has shown that despite a harsh rhetoric … when a reasonable deal comes, the US is ready to step up and join in, "Hammond said.

He credited Mr. Mnuchin as "an important force in shaping the government's response." to the capital increase.

Write to Josh Zumbrun at Josh.Zumbrun@wsj.com and Stephen Fidler at stephen.fidler@wsj.com


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