Why increase the IDB’s capital?

Demand for development lending by Latin America and the Caribbean has increased in recent years. This increase accelerated after the global financial  crisis hit the Latin America and the Caribbean, and the poorest and most vulnerable countries in the region were hit especially hard.

The IDB has kept pace with demand through an increase in financing. This was achieved by the implementation of some short term measures, including a temporary increase in the callable capital of Canada, one of its members. The IDB’s last capital increase was approved in 1995.

The sharp increase in demand for IDB resources prior to and after the crisis—together with the long-term development needs related to climate change, lagging productivity and social and economic inequality—led to a reevaluation of the Bank´s capital levels.

The IDB´s Board of Governors on July 21, 2010, agreed to the terms of the proposed increase of the Bank’s Ordinary Capital by $70 billion, the largest expansion of resources in the Bank’s history, and to provide an unprecedented package of financial support to Haiti. The agreement also includes a proposal to increase, by $479 million, the Fund for Special Operations, which finances operations in the region’s poorest nations.

To implement the Governors agreement, member countries are voting to approve the resolutions autorizing increases in the Bank’s Ordinary Capital and the FSO replenishment. Governors approved the resolution to replenish the FSO and the IDB´s Board of Executive Directors agreed to extend the vote on the resolutions authorizing the increase in Ordinary Capital through Jan. 31, 2012. The resolutions provide that the Bank’s capital increase will be fully implemented through 2015 as parliaments in each of its member countries appropriate the necessary funds.

The IDB is not alone in its capital increase process. Other development institutions have received capital increases in recent years, or are reviewing their capital needs. The Group of Twenty (G-20) nations agreed in 2009 to ensure that all multilateral development organizations have an adequate level of resources to meet the demand for development financing from the world’s developing countries.