By Ikechi Emenike
A major highlight of every annual IMF/World Bank meetings is the speech of the World Bank President during the Opening Ceremony. It is typically written in delectable economic prose. If words can defeat poverty, the World Bank would have succeeded over many elegant speech circles. Then, it would have justifiably surprised veteran delegates that after so many years of such lofty declarations and promises, a large proportion of the world’s population still live in poverty. Poverty is, indeed, very stubborn.
The percentage of the world’s population that live in poverty will keep rising, except the World Bank changes strategy and find more resources to match current and future global needs. Nothing in this piece suggests that the World Bank’s management is incompetent or unenthusiastic in the pursuit of their mandate. The truth, however, is that the World Bank lacks the resources to walk their talk. Many would agree that by their speeches, both Bretton Woods Institutions — the IMF and the World Bank — are eager to defeat global poverty, and enhance international prosperity. But they are severely constrained by the relative poverty of their purse.
In terms of progression, World Bank capital base has relatively lagged. From an initial capital of $10 billion in 1945, the Bank’s capital base increased to $313.5 billion in 2022. Certainly, $10 billion was a tidy sum in 1945. It shows that in 1945, World Bank capital base was 80% of the GDP of Germany, 54% of China’s and 169% of Italy’s. Currently, the scenario has drastically changed. The ratio of the World Bank’s capital to the resources of each of the G-7 countries has significantly reduced (see table).
S/N Name 1945 % AGAINST WB & IMF 2022 % Of WB
1. The World Bank Initial Capital = Current Capital base =
$ 10billion $313.5billion
2. United States GDP = $228billion 4.4% for both GDP = $25.46trillion 1.2%
3. United Kingdom GDP = $34.16billion 29.3% GDP = $3.07trillion 10.3%
4. France GDP = $28.7billion 34.8% GDP = $2.782 trillion 11.3%
5. Germany GDP = $12.5billion 80% GDP = $4.072trillion 7.7%
6. Japan GDP = $21.6billion 46% GDP = $4.231trillion 7.4%
7. China GDP = $18.5billion 54% GDP = $18.1trillion 1.7%
8. Italy GDP = $5.9billion 169% GDP = $2tillion 15.7%
Sources: www.worldbank.org, www.statista.com/statistics/1334182/wwii-pre-war-gdp/, UK Office for National Statistics
Indeed, the size of the World Bank capital relative to the size of the economies then made it possible for the Bank to, in 1947, approve $500 million to France. This was a whopping 1.7% of the European country’s GDP then. Today, can the Bank approve 1.7% of GDP, about $50 billion, to France alone or any G-7 country from its core resources?
From all angles, the World Bank needs to substantially increase its core reserves to a rough estimate of between $3 trillion to $5 trillion. Sourcing such resources is not difficult as it may sound. This is doable. With faith, creativity and renewed thinking, the Bank can recreate its capacity to serve its mandate. Obviously, the World Bank needs to be truly the Bank of the World. But without adequate financial resources, the Bank is just like any other handicapped international organization with good intentions but a bag of empty promises. A bank for development or commercial purpose is as potent as its purse.
Of course, the World Bank’s income stream has presently diversified to include contribution from members, funds raised from financial markets, earnings on investments, and money from borrowing countries when they pay back their loans. These funding sources are significant, but certainly not sufficient to provide the Bank with the needed resources, in this day and age, to make the bold step toward boosting and expanding global prosperity that is needed to make the desired dent in poverty.
The World Bank can set up a committee of those who believe in the need and feasibility of a new funding status for the Bank. The committee would identify funding sources as well as draw the road map for attracting and warehousing such funds with the Bank.
The world needs a better-funded World Bank. With more resources, the World Bank can do much more. No institution is better placed to enhance humankind than the World Bank. Not the United Nations; the UN can do all the talking. Nor the International Monetary Fund, with its famed brilliant analysis and graphs. But the World Bank, by its mandate and potential reach, can practically and visibly make this world a much better place.
In actuality, apart from God, only the World Bank can decree that “Let there be light” and there would be electricity across the world. The Bank is best structured to end global hunger, illiteracy and squalor. Sweet speeches cannot solve humanity’s challenges. Denial won’t either. The will to act and the purse to match it are the viable options.
Emenike, an Economist, is a Nigerian.