On March 16, 2023, US Treasury Secretary Janet Yellen testifies before the Senate Finance Committee on the proposed budget request for 2024, on Capitol Hill in Washington, DC, March 16, 2023. PHOTO AFP WASHINGTON - US Treasury Secretary Janet Yellen has rejected the idea of a near-term capital increase for the World Bank and said she expects US nominee Ajay Banga to win the election as the bank's next leader, with no challengers emerging as the nomination period closes.
Yellen told US lawmakers that she wants World Bank reforms to broadly expand lending to fight climate change and other global crises, largely by stretching the bank's existing resources, adopting innovative financing policies and mobilizing private finance.
In January, the World Bank made a capital increase. It would not be possible without the support of the United States, the dominant shareholder of the World Bank.
Yellen said he was not requesting a capital increase during a budget hearing of the US House of Representatives Appropriations Subcommittee on State, Foreign Operations, and Related Programs. We want to see better mobilization of private resources alongside World Bank investments, but we're not requesting a capital increase at this time. The World Bank unveiled an evolution road map to meet the challenge Yellen laid out last year to expand its mission beyond country-specific development projects to tackle global crises. But a capital increase would require billions of dollars in US contributions to keep its shareholding in the bank, a move that is counter to demands from House Republicans for spending cuts in exchange for raising the US debt ceiling.
The World Bank's last capital increase, of $13 billion, was approved by member countries in 2018 but the lending capacity created has been strained by the COVID-19 pandemic and spillovers from Russia's special military operation in Ukraine.
The World Bank evolution plan has been drafted under the current president, David Malpass, who was nominated by former President Donald Trump and announced his resignation in February after his initial failure to say he backed the scientific consensus on climate change.
In February, Malpass told Reuters that loan ratio reforms could unlock an additional $4 billion annual lending capacity - or $40 billion over a decade - a figure far less than the hundreds of billions of dollars that a G 20 report said was possible.
Yellen previously called for the World Bank to take bolder and more imaginative steps to unlock more lending for climate change.
Yellen: Climate change could harm asset values, US economy, and the US economy.
It is expected that the plan will be passed to Banga, the former MasterCard CEO nominated by President Joe Biden.
The World Bank closed a month-long window for nominations for its next president, with no alternatives to Banga announced. The bank's board is expected to announce next steps in its selection process on Thursday, with a view to confirm a new leader by early May.
Yellen told lawmakers that she expects Banga to be elected World Bank president with a charge to improve the institution's response to 21st century challenges, including climate, pandemics, conflict and fragility.
Banga, 63, who was born and educated in India but now a US citizen, has won the support of enough other governments to ensure his confirmation, including from Bangladesh, Britain, Egypt, France, Germany, India, Italy, Ivory Coast, Japan, Kenya, Saudi Arabia and South Korea.
Yellen said on Wednesday that US policy toward multilateral development banks' energy finance is flexible and that some low-income countries may qualify for financing for natural gas projects if renewable energy is not feasible.