India will be pushing for greater capitalisation of the World Bank at the meeting of G20 finance ministers in London next month. The meeting will precede the Pittsburgh meeting of G20 head of states scheduled later in September.
A senior finance ministry official said the country’s stand would not be different from what Prime Minister Manmohan Singh had put across in the London meeting earlier this year. The objective now would be to “push G20 more on these issues and underscore the stand”.
Among the other issues likely to be part of India’s list are pressure on the developed countries to work more towards the stabilisation of the western market, concrete measures for poor countries and concessional financing by multilateral agencies.
India’s stress on IMF gold sales to raise funds has already found approval with the lending agency. IMF last month announced the sale of some of the gold held by it. It holds 103.4 million ounces (3,217 tonnes) of gold with a market value of about $12 billion as of March 31. To meet the financing needs of low-income countries during the global crisis, some of the proceeds of these sales will be used to provide concessional lending to poor countries.
While the official said the move towards strengthening IMF has already started, the focus now needs to be on the Bank. “It is essential for sustaining a high level of bank lending, especially for infrastructure,” he said. Earlier, India felt the World Bank had sufficient cushion to tackle the global financial crisis and it was better capitalised than IMF. But, now it is felt that “if they continued with the present capital base, they will have to cut down on lending”.
India's quota in IMF is currently two per cent and it will need to roughly put in $10 billion as part of its commitment. An equal amount might be needed for the World Bank and ADB when their capital base is expanded and a realignment of shareholdings takes place.
The G20 heads of state had, earlier this year, agreed to make available an additional $850 billion of resources through the IMF and multilateral development banks to support growth in emerging markets and developing countries by helping to “finance counter-cyclical spending, bank recapitalisation, infrastructure, trade finance, balance of payments support, debt rollover, and social support”.
For the IMF, they agreed to step up bilateral financing from members of $250 billion. For the private financing arm of the World Bank, the IFC, the members committed to $3-4 billion in voluntary bilateral contributions to the new IFC Global Trade Liquidity Pool. They also agreed to support, through voluntary bilateral contributions, the World Bank Vulnerability Framework, including the Infrastructure Crisis Facility and the Rapid Social Response Fund.
The G20 also called for increasing individual country limits on World Bank lending to enable large countries to access required levels of finance and so support stability and recovery in their regions.
