Washington DC., Nov.15, 2008—“This summit of G-20 leaders and the G-20 meeting of finance ministers last weekend have begun to lay a productive foundation of discussion, input, and agreement. What matters now are the follow up actions. People are looking to leaders for a global, coordinated and fast response.
If September and October were about coordinated and cooperative monetary policies, then November and December will be increasingly about starting fiscal stimulus. China's recent $580 billion stimulus package was well timed and shows leadership. Further decisive actions will be needed. Such actions must take into account the interests of the poor and most vulnerable in developing countries.
Last month I called for a reform of the G7 and for a modernized multilateralism to better reflect the realities of the 21st century. It is a positive step forward that leaders of developed economies are now meeting together with leaders from the rising economic powers. But the poorest developing countries must not be left out in the cold. We will not solve this crisis, or put in place sustainable long-term solutions by accepting a two-tier world.
I welcome the reaffirmation by the Heads of Government of the importance of the Millennium Development Goals and their commitment to honor their pledges of overseas aid. If we are going to avert a human crisis, we will have to do more. At $100 billion a year, the amount spent on overseas aid is a drop in the ocean compared to the trillions of dollars that are now being spent on financial rescues in the developed world.
The World Bank Group will continue to stretch by expanding our funding, ideas, innovative products and partnership to help developing countries. I am encouraged by the leaders' commitment to ensure that we have sufficient resources to undertake this task.
I also welcome the commitment to increase the voice and representation of emerging and developing economies in the governance structure of the Bretton Woods institutions. Though management can make proposals, ultimately the decision on the size and timing of reforms rests with shareholders. I hope that some bold steps can be taken to build on the preliminary reforms agreed at last month's Annual Meetings.
I am also pleased to see the commitment of the G20 leaders “to strive to reach agreement this year on modalities that leads to a successful conclusion to the WTO's Doha Development Agenda with an ambitious and balanced outcome”. The best way to resist protectionist measures is to advance measures to open markets.”
Background: Support for Crisis-Affected Countries
World Bank Group President Robert B. Zoellick announced on November 11, 2008, that the World Bank would substantially increase financial support for developing countries:
The International Bank for Reconstruction and Development can make new commitments of up to US$100 billion over the next three years to protect the poorest and most vulnerable from harm, support countries facing big budget short-falls, and help sustain long-term investments upon which recovery and long-term development will depend.
At the same time, the World Bank lowered its growth forecast for developing country economies to 4.5 percent for 2009, compared to a previous projection of 6.4 percent, due to a combination of financial turmoil, slower exports and weaker commodity prices. It expects high income country economies to contract by 0.1 percent next year while the world economy ekes out only one percent growth.
In addition to expanded lending, the World Bank Group is working to speed up grants and long-term, interest-free loans to the world's 78 poorest countries, 39 of which are in Africa. Donors last year pledged US$42 billion over three years for the International Development Association, the World Bank's fund for these countries.
The World Bank Group is also ramping up its support to the private sector through the launch or expansion of four initiatives by the IFC, its private sector arm. Combining IFC funds and money mobilized from various sources including governments and other International Financial Institutions, these new IFC facilities are expected to total around $30 billion over the next three years.On Friday, the Government of Japan announced a $2 bn contribution to support the World Bank Group's new fund for bank recapitalization in small emerging markets.
Voice and Participation
At the Annual Meetings in October 2008, World Bank shareholders agreed a package of reforms. As a first step, this package:
Creates an additional Chair at the Board for Sub-Saharan Africa, giving developing countries the majority of seats on the World Bank's Board ;
Brings the share of developing countries to 44% for IBRD, aimed in particular at adding voice for the low income countries; brings developing country votes in IDA up to 48%
Implements a merit-based, transparent, and open selection process for the Bank President.
As a second step, shareholders agreed to:
Undertake a comprehensive and intensive work program to realign Bank shareholdings, moving towards an equitable voting power between developed and developing countries, including also IFC voice reforms.
Work on this second stage is beginning now.