WB could lend $50b more over decade with reform, says Yellen
Janet Yellen speaks during a news conference in London. File/Reuters
Central bankers, finance ministers and participants from more than 180 member countries are expected to gather in the US capital for the International Monetary Fund and World Bank’s spring meetings in the coming week.
A key topic of discussion will be the World Bank’s evolution, amid a push for lenders to revamp and meet global challenges like climate change. The United States is the largest shareholder of the World Bank Group.
“I expect there to be an update of the bank’s mission to add building resilience against climate change, pandemics, and conflict and fragility to the core goals,” Yellen said in the interview with AFP on Thursday.
She added that there needs to be a recognition that these challenges aren’t separate or conflicting but rather, inextricably linked.
“Second, there will be an announcement that the bank is stretching its financial capacity to meet these objectives, and adopting changes or endorsing changes that could result in an additional $50 billion in extra lending capacity over the next decade,” Yellen said.
The move would be a significant resource boost marking a 20 per cent rise in the International Bank for Reconstruction and Development’s (IBRD) sustainable lending level. The IBRD is the World Bank’s middle-income lending arm.
- Seeking added reforms - Yellen also said there would be an announcement on updating the bank’s operational model to “orient it towards the goals that we’re setting.” Among other things, this includes creating more incentives for the mobilization of both domestic and private capital.
“We seek additional reforms during the rest of this year,” Yellen said.
In March, the World Bank submitted an evolution plan to be discussed with its development committee on April 12, during the spring meetings.
Noting that World Bank President David Malpass has laid a “solid foundation” for the ongoing work, Yellen added that she expects US candidate Ajay Banga to be elected to the helm of the organisation and continue the revamp.
Banga was the sole nominee for the position after Malpass announced this year that he would step down early.
Also on policymakers’ agendas next week are support for war-torn Ukraine and debt restructuring.
“We have seen some movement by China on participating in debt restructuring for Sri Lanka, which is a hopeful sign,” Yellen said.
As global growth slows, the World Bank previously warned that the outlook is especially tough for the poorest economies -- which face sluggish growth driven by heavy debt burdens and weak investment.
Yellen had earlier said that China should move more quickly on some debt restructurings.
Discussions on this front will continue next week as a newly formed global sovereign debt roundtable gathers, she told AFP.
“We’re having useful technical discussions on important elements of debt restructuring. China has been participating, and we all continue to press China for improvements,” she said.
Washington will continue pushing for a speedier and more predictable operation of the G20 “common framework” for debt restructuring as well.
On Ukraine, Yellen said: “Once again, we will work with all of our allies to insist that Russia cease its brutality in Ukraine.” She added that the United States would press for economic support alongside its partners on this front.
Separately, US Treasury Secretary Janet Yellen on Monday said deposit outflows from small and medium-sized banks were diminishing, but she was watching the situation closely and was “not willing to allow contagious runs to develop” in the US banking system.
Yellen told reporters after an event at Yale University that confidence in the banking system was strengthened by actions taken by the Treasury, Federal Reserve and Federal Deposit Insurance Corp after the failures of Silicon Valley Bank and Signature Bank.
“My read is that outflows from smaller and medium-sized banks are diminishing, and matters are stabilizing, but it’s a situation we’re watching very closely,” Yellen said.
Asked whether the Financial Stability Oversight Council, the multi-regulator body charged with curbing systemic risks, had spent too much time on assessing risks of climate change and missed problems that led to the failures of Silicon Valley and Signature, Yellen disagreed, saying the body studies all potential financial risks.
“We’ve focused on a range of issues including financial, risks and have not put all of our focus on climate risks,” she said, adding that the body had also identified interest rate mismatches as a potential risk.
“I don’t think there’s a fundamental problem with the banking system,” she added.
Agencies
