World Bank's capital increase

So finally some good news today! The World Bank's shareholders have agreed to raise the bank's lending capital by $5.1 billion. This will come in two separate increases of $3.5 billion and $1.6 billion (by developing countries). With this, the voting share of the developing economies have also gone up (47.19% from 44.06%). China has surpassed Germany, France and UK to become the third largest shareholder with 4.42% voting rights from an earlier 2.77% voting rights. This is really some good news since its been long overdue to increase the lending and voting share of some major developing countries like China. This makes an international body like World Bank look more representative of the international economies in the current global economic scenario.

Also, I am glad that the lending capital is increased. There will be a total capital increase of $86.2 billion for the International Bank for Reconstruction and Development (IBRD). The difference of the total capital increase of $86.2 billion and the operating capital of $5.1 billion is called "callable capital" that can be drawn upon when emergency arises, from the member countries. There are too many projects that depend on World Bank funding in developing and poor countries. And with the world bank committing itself to large amount of funds during the recession, this has strained its resources. And now I hope that the projects in poor countries will continue unabated.

All this said, I would still like to see more improvements in the governance architecture of the IMF and World Bank. Though this capital increase is a good news, we still need more capital down the road and I hope that gets done. Also, some poorer countries have lost some of their voting share due to this re-allocation. I hope this is also corrected down the road. Personally, I think that European countries have far more voting rights than what is needed. If we consider Europe as a whole from an economic standpoint, we have far more European countries with larger voting rights than what should be to represent Europe. I hope this correction is also done in the near future so that we can accommodate more poorer countries in the governing architecture with more voting rights for them.

Sources:
http://www.businessweek.com/news/2010-04-26/world-bank-says-nations-agreed-to-boost-lender-s-capital.html

http://blogs.worldbank.org/meetings/node/616

http://www.nytimes.com/2010/04/26/business/26bank.html