Capital increase process
The IDB’s capital increase review process began at the Bank's Annual Meeting in Medellín in March 2009. The Board of Governors called unanimously for Management to begin then a review of the need for a general capital increase of the Ordinary Capital and replenishment of the Fund for Special Operations.
A Committee of the Board of Governors was formed to review the Bank’s capital requirements. Its first meeting was held in Santiago, Chile, on July 2, 2009. The Governors considered a first working paper with five components:
- A review of the Bank’s development contribution to the region from the beginning of the Bank’s previous general capital increase (IDB-8) in 1994 though 2008
- A description of the main challenges facing the region from the present until 2020
- A discussion of the Bank’s comparative advantages as a regional development institution
- An analysis of the demand for IDB resources and
- An agenda for enhancing the Bank’s relevance as a development partner
The Committee of the Board of Governors met again in Madrid on October 8, 2009. They praised the Bank’s progress in the steps to improve development effectiveness and accountability, and agreed to move ahead with the final phase of their review of the Bank’s need for a general capital increase.
They agreed to focus on five areas in the next phase:
- The Bank's appropriate size and specific mandates going forward
- Its institutional reforms and a timetable for their implementation
- Its private sector lending policies
- Its concessional support for the poorest and most vulnerable people in the region and
- How the IDB allocates its income
The Governors resolved to complete their review by their next annual meeting in Cancún, Mexico, in March 2010.
In addition, as part of the review of the need for what would be the Ninth General Capital Increase, the Bank’s Board of Executive Directors approved a public consultation plan on September 2, 2009. The plan provides for disclosure of a number of documents related to that process and a series of public consultations in nine countries in the Region, Europe and North America.
A working group comprised of officials from 16 member countries of the IDB was formed to speed up the review process after the meeting in Madrid.
Thanks to their work, the Committee of the Board of Governors was able to narrow the range of specific proposals for IDB lending levels to Latin America and the Caribbean, nearing a consensus on the region’s development needs over the next decade during a meeting in Washington on March 2.
The Governors reviewed during the March 2 meeting new financial scenarios to sustain that lending and discussed several options to address the special needs of Haiti. The Committee agreed that the Bank had made significant advances on many of the reforms, which include a results-based framework to monitor and evaluate programs, a new private sector strategy, a new capital adequacy model and a stronger anti-corruption framework, among other measures. The Governors discussed mechanisms to monitor implementation of these reforms.
On March 22nd during the IDB’s Annual Meeting in Cancun, Mexico, the Bank’s governors initiated the process to increase the Bank’s ordinary capital. On July 21st, the Board of Governors of the IDB formally approved the Bank’s Ninth General Capital Increase.
Under the agreement, the IDB will increase its capital by $70 billion, the largest expansion of resources in the Bank’s history, and provide an unprecedented package of financial support to Haiti. The agreement also includes a replenishment of the Fund for Special Operations, which finances operations in the region’s poorest nations.
The Bank’s capital increase will be implemented through 2015 as legislative branches in member countries appropriate the necessary funds.