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Congressional Research Service
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 upper-
middle 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 near-
market 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 I. 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
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