Updated December 14, 2018
2018 World Bank Capital Increase Proposal
On October 12, 2018 World Bank members, including the
United States, approved a $60.1 billion capital increase for
the World Bank’s main lending facility, the International
Bank for Reconstruction and Development (IBRD), which
would raise the IBRD’s capital from $268.9 billion to $329
billion. World Bank members also endorsed a $5.5 billion
capital increase for the International Finance Corporation
(IFC), the World Bank’s private-sector lending arm, which
would more than triple the IFC’s capital base from $2.57
billion to $8.2 billion. Congress would need to fully
authorize and appropriate funds for any U.S. participation
in the proposed capital increase. In testimony before the
House Financial Services Committee in December 2018,
Treasury Undersecretary David Malpass committed to work
with Congress over the coming months to prepare the
necessary legislation to move forward with the U.S.
contribution to the capital increase.
According to the Bank, the capital increase would allow the
Bank to provide an annual average of $100 billion in
development support. Over the past five years (2013-2017),
total World Bank annual support averaged $59 billion.
Bank leadership is aiming for final approval of the capital
increase package at the October 2018 annual meetings.
The Trump Administration supports the capital increase,
which will be accompanied by reforms designed, in part, to
address a longstanding concern for many U.S.
policymakers: high levels of World Bank lending to uppermiddle income countries, especially China. In a statement at
the 2017 IMF and World Bank spring meetings, U.S.
Treasury Secretary Steven Mnuchin stated that, “the
relationship between the World Bank and more
creditworthy countries [such as China] should mature over
time, with the absolute level of borrowing declining as
countries become better able to finance their own
development objectives.” Mnuchin also highlighted the
issue of shifting World Bank lending to poorer countries
through income-based country lending allocation targets
and differentiated loan pricing.
What is the World Bank?
The World Bank is a multilateral development bank
(MDB), established in 1945, that offers loans and grants to
low- and middle-income countries to promote poverty
alleviation and economic development. The World Bank
has near-universal membership, with 189 member nations.
Technically, the term, “World Bank” refers to two entities:
the IBRD and the International Development Association
(IDA), which lend directly to governments to finance
development projects and policy programs in member
countries. The IBRD’s primary activity is providing nearmarket rate, long-term loans (up to 35 years) to eligible
member countries. IBRD loans are financed through its
equity and from borrowing in the international capital
markets (Figure 1). MDBs are able to borrow from
international capital markets on favorable terms because of
their AAA ratings, which in turn reflect their strong capital
positions, their record of obtaining loan repayment, and the
additional backing of callable capital. Funds not deployed
for lending are maintained in IBRD’s investment portfolio
to supply additional liquidity for lending operations.
Figure 1. IBRD Business Model
Source: The World Bank, Adapted by CRS.
IDA was established in 1960 to complement the IBRD by
extending zero or low-interest loans to developing and least
developed countries. IDA loans are mainly supported by
annual contributions by World Bank member countries, but
increasingly, IBRD is also making transfers to IDA, as well
as several World Bank trust funds. In addition to its lending
operations, the World Bank provides financial management
services for funds such as the Afghanistan Reconstruction
Trust Fund, the Global Fund to Fight AIDS, Tuberculosis
and Malaria, and the Global Environment Facility. As of
the end of FY2017, the World Bank managed $31.6 billion
in multi-donor trust funds.
Three other World Bank-affiliated organizations are
dedicated to supporting the private sector. The IFC
promotes private sector development in poor and
developing countries by making loans and investments in
small- and medium-sized companies. The Multilateral
Investment Guarantee Agency (MIGA) provides private
investors insurance coverage against non-commercial risk
in developing countries. The International Center for the
Settlement of Investment Disputes (ICSID) facilitates
investor-state dispute settlement.
2018 Capital Increase Proposal
The 2018 capital increase proposal is only for the IBRD and
the IFC (Table 1). The capital that the United States and
other shareholders contribute to the IBRD comes in two
forms: (1) “paid-in capital,” which requires the transfer of
funds to the Bank; and (2) “callable capital,” which are
funds that shareholders agree to provide, but only when
necessary to avoid a default on a borrowing by the World
Bank itself. (A member country defaulting on a World
Bank loan would not cause the Bank to draw on its callable
2018 World Bank Capital Increase Proposal
capital.) The IFC does not use callable capital and relies on
its own earnings ($22 billion as of the end of FY2017) for
the majority of its capital. Neither the World Bank, nor any
other MDB, has ever had to draw on its callable capital.
Unlike the IBRD, the IFC only has paid-in capital.
shareholder and the only country with veto power over the
most important World Bank voting decisions (i.e., those
requiring an 85% majority). At 5.71%, China remains the
third largest shareholder, behind Japan, which would have
6.83% of total voting power if the reforms go in effect.
The IBRD request is technically a combination of a general
capital increase (based on the increases proportionate to
existing shareholder) and a selective capital increase, which
would increase the share of some countries more than
others in order to alter the relative voting power of member
Despite its increase in voting power, China’s World Bank
voting power remains well below its share of the global
economy—18.7% (based on purchasing power parity (PPP)
according to the IMF’s April 2018 World Economic
Outlook. By contrast, the U.S. share of world GDP (PPP) is
15.12% compared to voting power of 15.87%. Under the
current proposal, the U.S. share at the IFC after the capital
increase would decrease and its voting power would decline
from 20.99% to 16.39%.
Table 1. Proposed World Bank Capital Increase
Amount ($ in billions)
General Capital Increase
The United States and the World Bank
Selective Capital Increase
The proposed capital increase comes eight years after the
previous World Bank capital increase ($87 billion) in 2010.
With the exception of small selective capital increases to
adjust relative shareholding, the Bank has raised its capital
base four times: 1959, 1979, 1988, and 2010 with U.S.
Source: World Bank
If approved by the World Bank’s membership, the capital
increase package includes several reforms.
Further enhancing the voice and participation of socalled “developing and transitional economies,”
including increasing China’s voting power.
New guidelines for the World Bank lending portfolio in
order to reduce lending to middle-income countries and
direct more funding (70% of total lending) to lower
Introduction of differentiated pricing based on country
income status, with higher income countries paying
more than the Bank’s other borrowers;.
Separate funding for the World Bank to engage on
“global public goods,” such as climate risk, global
pandemics, tax information sharing, agriculture, etc.
The main beneficiary of the rebalance is China, which
would see its voting power increase from 4.45% to 5.71%.
Following China, the next largest increase in voting power
is Sweden, whose voting power increases from 0.85% to
0.89%. According to analysis by the Wall Street Journal, a
total of 52 countries took small cuts to their voting shares to
effectuate China’s increase; for 50 of them, the cut was less
than 0.1% percentage points.
The United States is the largest contributor to the World
Bank; accounting for the largest share of the IBRD’s
subscribed capital, $46.4 billion (17.25%) of a total of $270
billion. Of the U.S. contribution, $2.9 billion is paid-in
capital. This amount has been fully authorized and
appropriated by Congress in several appropriations
measures over the years. The balance of the U.S.
subscription, $43.5 billion in callable capital, has been fully
authorized. However, only a portion, $7.7 billion, has been
appropriated and could be used by the World Bank without
need for further congressional action.
Since the 1982 foreign operations appropriations bill was
adopted, Congress has authorized but not appropriated
callable capital. U.S. law (22 U.S.C. 286c) requires that
Congress give its assent before the United States can vote in
favor of a new IBRD funding plan that increases U.S.
contributions According to its Articles of Agreement, an
IBRD capital increase requires approval by members
holding at least 75% of total voting power. Since the United
States has voting power of 15.98%, it cannot veto an IBRD
capital increase. At the IFC, a capital increase requires an
80% majority of the total voting power. Since the U.S.
voting share at the IFC exceeds 20%, U.S. support is thus
required for the IFC capital increase to proceed, regardless
of whether the United States decides to financially
participate in the IFC capital increase.
The U.S. government is seeking as a a pre-condition to
voting for the entire World Bank capital increase, that the
IFC Articles of Agreement be amended to increase the
share of voting power required from 80% to 85% for any
future IFC capital increase to preserve U.S. veto over any
future IFC capital increases.
Martin A. Weiss, Specialist in International Trade and
The United States would see a small decline in voting
power, from 15.98% to 15.87%, but remains the largest
2018 World Bank Capital Increase Proposal
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
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