India becomes 7th largest shareholder in World Bank

By admin • April 27th, 2010

Subscribe to Hexxcom's RSS feed to get the latest Updates. Thanks for visiting!

World Bank logo.
Image via Wikipedia

New Delhi: India will have a larger say in the affairs of the World Bank as it has become the seventh largest shareholder in the multilateral lender with 2.91% voting rights.

China has overtaken Germany, France and the UK to become the third largest shareholder in the Bank with 4.42% voting rights. Both India and China hitherto enjoyed an identical 2.77% voting rights.

“The change in voting power helps us better reflect the realities of a new multi-polar global economy where developing countries are now key global players,” said World Bank president Robert B Zoellick.

India’s shareholding in the Bank had been declining since 1970s and the trend has been reversed for the first time in a generation.

The development committee of the World Bank, which met on 25th April in Washington, decided to increase the financial capacity of the Bank and the role of developing countries in its governance.

There is an overall shift of 3% voting share in favour of developing countries, bringing their total vote share to 47%. The change will give emerging nations more say in how the bank is run and how its funds are disbursed.

These changes “are transformative in nature and will reposition the World Bank Group in the international financial architecture”, said Finance Secretary Ashok Chawla, who led the Indian delegation to the 2010 Spring meetings of the Bank.

“They will strengthen the role the World Bank Group in being an effective multilateral instrument for eradicating poverty, achieving the MDGs (millennium development goals), supporting international efforts to manage global public goods, and most importantly, keeping it relevant in a dynamic world,” he said.

Membership of the financial institution gives certain voting rights, which are the same for all countries. But additional votes are granted depending on a country’s financial contribution to the organisation.

The development committee agreed to raise the capital base of the Bank through a general capital Increase. This increase is taking place after a gap of over 30 years. There is agreement to raise the authorised capital of the Bank by $58 billion with a paid-in portion at 6% amounting to $3.5 billion.

The Bank is restricted by its Articles to restrict its total outstanding loan commitments to its total authorised capital. As a result of the increase in demand for Bank assistance, it was likely that the Bank would have reached its statutory lending limit. This would have constrained the Bank’s lending capacity and there would have been a decline in Bank assistance to countries.

The increase in its capital base, along with the capital that would flow in as a result of the realignment in shareholding, would allow the Bank to lend an additional $86 billion.

As one of the largest borrowers of the Bank, India would be able to secure additional assistance from the Bank. The enhanced lending capacity would enable India to receive additional assistance to the extent of $7-10 billion.

Member nations also agreed to raise more funds for global aid at the annual spring meeting of the World Bank and the International Monetary Fund (IMF).

The increase in shareholding of developing countries fulfils the development committee’s commitment in Istanbul in October 2009 to generate an increase of at least 3 percentage points in the voting power of developing and transition countries. The governments also approved over $90 billion in extra money for the Bank’s various arms that provide aid and capital to member countries.

“We are taking momentous decisions today, decisions that will set the direction of this unique institution for many decades to come…. By giving the World Bank Group a new sense of purpose and direction with enhanced governance and strength, we will ensure that the vision of its founding fathers is fulfilled,” said Mr Chawla.

Source: The Economic Times: April 27, 2010

Reblog this post [with Zemanta]

Leave a Comment

« | Home | »