World Bank edges near capital boost as US drops objection

The World Bank won support from its member countries for a $13 billion capital increase, with the US dropping its objection as the lender imposes measures that would potentially reduce loans to China.

The boost will be accompanied by internal steps “including operational changes and effectiveness reforms, loan pricing measures, and other policy steps,” the World Bank said in a statement after policy makers met on Saturday in Washington.

China will probably “gradually” end up borrowing less from the World Bank under the new system, which will charge higher rates of interest to wealthier countries, World Bank President Jim Yong Kim told reporters on Saturday. Kim said the bank will increase annual lending to about $80 billion, from $59 billion in the year ended June 2017.

The US dropped objections to the capital boost after previously advocating for a limit on the World Bank’s resources and questioning why it lends so much to China, given the nation’s growing economic clout and ability to raise money in financial markets. But countries such as the UK had been pushing for a capital increase, arguing the lender needs more firepower to finance projects in developing countries.

Under the new agreement, the World Bank will focus more on lending to “low middle-income countries,” Kim said this week at the bank’s annual spring meetings in Washington. The development lender classifies China as an “upper middle-income” nation.

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