The World Bank doesn’t like how the G20 report wants to lower capital requirements. Sources
NUSA DUA, Indonesia (Reuters) – Four people who know about the situation say that the World Bank is trying to stop the release of a report made for the Group of 20 major economies. The report calls for lowering the bank’s capital requirements to increase its ability to lend.
Supporters of the independent report, which will be released this week in Indonesia during a meeting of G20 finance officials, think the changes would free up much-needed funds for poorer countries at a time when high inflation makes it hard for rich countries to spend more money abroad.
But sources told Reuters that the World Bank and other multilateral development institutions don’t want the report to be made public because it has suggestions to make capital adequacy ratio requirements less strict.
The World Bank has said for a long time that changing its strict capital requirements would hurt its reputation on capital markets, put its AAA rating at risk, and make it harder for it to raise money to lend to poor countries.
A spokesperson for the World Bank said that the bank was “evaluating” the report’s suggestions.
One of the sources said that the recommendations in the report, which was put together by economists and development experts for the G20, would require changes to the way multilateral banks are run. Some changes will take longer to happen, while others could “move the needle in the short term,” a second source said, without giving any more details.
The report was not checked by Reuters on its own.
A third source said that it was clear that changes were needed because the global economy faces so many problems that all require a lot of money to solve.
“There is a lot of money that can be borrowed to help with urgent global and development needs. “That needs to be looked at carefully and with an eye toward finding solutions,” added the third source.
Development economists say that the World Bank and other multilateral development banks could lend up to $1 trillion if they changed their capital ratios and were willing to take a small drop in their ratings on capital markets.
In April, Janet Yellen, who is in charge of the U.S. Treasury, said that the World Bank needed major changes to help it deal with the problems of today.
Yellen said it would take “trillions and trillions of dollars” to meet the growing number of needs, but the World Bank only gave out $99 billion in loans in the fiscal year of 2021.
Indonesia, which is hosting the G20, didn’t say anything about the report or when it would be out.