CHAPTER IV
SHAREHOLDING STRUCTURE, FINANCIAL PARAMETERS AND LENDING AUTHORITY OF
THE EIGHTH GENERAL INCREASE IN RESOURCES
1. SHAREHOLDING STRUCTURE
A. Capital structure at the end of the Eighth General Increase in the Resources
of the Bank 4.1 As part of the Eighth General Increase in the Resources
of the Bank, the share distribution of the existing country groups, i.e.
Latin America and the Caribbean, the nonregional members, the United States,
and Canada, will be changed, by the end of the Eighth Replenishment, to
reflect the following: Latin America and the Caribbean will decrease from
53.86 percent to 50.013 percent, the United States will decrease from 34.67
to 30.029 percent, Canada will decrease from 4.38 percent to 4.002 percent,
and the nonregional members will increase from 7.09 percent to 15.955 percent.
Within the nonregional and Latin America and Caribbean groups, there will
also be capital share and voting power realignments. Table IV-1 below indicates
the voting power at the end of the Seventh Replenishment and the voting
power outcome at the end of the Eighth Replenishment which results from
the changes in the distribution of shares.
4.2 The Eighth General Increase in the Resources of the Bank is intended
to provide additional capital to the Bank while, at the same time, realigning
shares and voting power. Therefore, the proportion of paid-in capital to
be subscribed by individual members will vary and is based on: (i) the share
and voting power changes; (ii) the level of paid-in for the total increase
of capital resources (that is, 2.5 percent of US$40 billion or US$1 billion);
and (iii) the condition that, for equity reasons, all members have virtually
the same cumulative percentage (4.299 percent) of paid-in capital by the
end of the Eighth Replenishment.
4.3 In practice, new shares are first allocated by country group and by
country to achieve the desired voting power distribution shown in Table
IV-1. The number of new paid-in shares to be subscribed by individual members
is then determined so that it results in each member and/or group's cumulative
paid-in subscription being as close as possible to 4.299 percent of the
total by the end of the Eighth Replenishment. The resulting allocation of
paid-in shares is shown in Table IV-2.
2. PARAMETERS FOR THE CAPITAL INCREASE
A. Size of the capital increase
4.4 The Eighth General Increase in Resources will provide an additional
US$40 billion equivalent in ordinary capital resources to the Bank. The
paid-in portion of capital will be 2.5 percent, amounting to approximately
US$1 billion equivalent; the remaining 97.5 percent, or US$39 billion, will
be provided in the form of callable capital.
B. Lending parameters
4.5 In 1994 the Bank is expected to lend approximately US$6 billion in convertible
currencies. A US$40 billion increase in capital, loan repayments, reserve
additions, and the results of the change in borrowing policy approved in
1991, would allow increases in this lending level, as needed. Actual lending
in any given year will vary depending on the borrowers' needs and capacities,
the state of the Bank's project pipeline, and the Bank's capacity to prepare
good projects. The proportion of Bank financing provided to individual projects
will be guided by the limits set forth in the financing matrix, as well
as the country's willingness to make an important financial commitment to
the investment and to its long- run sustainability. The Bank has a long
history of supporting the smaller countries of the region. Thus, it will
continue to have as an indicative goal to lend 35 percent of total lending
to the countries of Group C and D; this percentage may vary given the priority
on lending with a poverty reduction focus. Actual lending programs for successive
three-year periods will be presented annually to the Board of Executive
Directors as part of the Bank's medium-term planning framework.
C. Subscription and encashment
4.6 Capital subscriptions will be provided to the Bank in six equal installments
over the 1994 to 1999 period. Members will have the option of delivering
non-interest-bearing promissory notes or similar instruments to the Bank
to meet their payments on paid-in subscriptions in lieu of immediate cash
payments. Each note would be redeemed in five equal annual encashments over
the 1994-2003 period.
D. Currencies
4.7 All of the capital subscriptions are to be made in freely convertible
currencies. For the paid-in capital, payments shall be made in the currency
of the member, in such a manner as to assure that the currency is freely
convertible for the purposes of the Bank's operations or with the agreement
of the member to convert on behalf of the Bank its currency into those of
other members for the same purpose.
3. PARAMETERS FOR THE INCREASE IN THE FUND FOR SPECIAL OPERATIONS (FSO)
A. Size of the increase to the Fund for Special Operations
4.8 There will be an additional US$1 billion equivalent of total new contributions
to the FSO, divided into basic, supplemental and special contributions as
indicated in Table IV-3. This amount, together with reflows and other sources,
would permit continuation of FSO lending at or above levels attained during
1990 to 1993. The Board of Executive Directors will determine the appropriate
FSO annual lending program and lending terms and conditions on the basis
of availability of resources and development needs. The resources of the
FSO shall be managed on a basis which can ensure a steady and predictable
level of assistance until such time as Governors may decide in favor of
an increase in FSO resources. Given the probable needs over the 1994 to
1997 period, and the limited amount of FSO available, these resources will
be used exclusively in the poorest, least developed countries in Group D
(presently Bolivia, Guyana, Haiti, Honduras and Nicaragua) and for the Caribbean
Development Bank for on-lending to eligible non-IDB member countries.
4.9 The Board of Executive Directors will determine the appropriate annual
levels of Intermediate Financing Facility (IFF) and nonreimbursable convertible
currency technical-cooperation support. Countries in the C and D country
groups with incomes below US$1,600 GDP per capita as shown in the 1993 IDB
Annual Report would be eligible for IFF support and national technical-cooperation
grants, with priority given to the poorest countries. Given the probable
needs over the 1994 to 1997 period, and the limited amount of IFF resources
available, it is anticipated that the Board of Executive Directors would
program IFF-assisted ordinary capital lending in such a manner that the
available resources for lending in the early years would approximate Seventh
Replenishment levels. By April 1996 there will be a review of the needs
of the D1 countries relative to the availability of IFF resources. For the
borrowers using the IFF, the percentage of IFF lending in the mix and therefore
the effective percentage subsidy may vary, inter alia, with the per capita
income levels. The Board may revise the per capita ceiling to reflect significant
changes in economic conditions.
B. Use of FSO liquidity to generate funding for technical cooperation
and the Intermediate Financing Facility
4.10 FSO loan income, during this period, will be largely a function of
previously approved loans, so that the income from these loans is essentially
fixed. Therefore, FSO liquidity with its resulting investment income must
be adjusted, via the schedule of encash- ments, to meet technical cooperation
and IFF objectives. A set schedule of encashments enables the Bank to generate
a predictable source of funding for its IFF and technical cooperation activities.
This in turn will permit the Bank to program its activities, particularly
technical cooperation, on a multi-year basis. This will solidify technical
cooperation as a main-line activity with predictable financing rather than
as a residual activity undertaken only when resources are available.
C. Schedules of contributions and encashments
4.11 FSO contributions would be payable in four equal installments for the
basic US$199.87 million contribution, and in six equal installments for
the remaining supplemental and special contributions. As is the case for
capital subscriptions, members will have the option of delivering non-interest-bearing
promissory notes or similar instruments to meet their payments in lieu of
immediate cash payments. In the period beginning on the sixth year after
the effective date of the replenishment agreement and ending on December
31, 2004, the Bank will, by periodic transfers from the Ordinary Capital
net income, consistent with prudent financial management, make up any shortfall
in the unallocated special contributions existing during that period which
is not covered by member country contributions pursuant to the agreements
set out in the footnotes in the following table.
D. Maintenance of value
4.13 No maintenance of value obligations will apply to member contributions
to the FSO.
E. Transfers from the FSO General Reserve to the IFF account
4.14 In order to achieve the desired level of IFF assisted ordinary capital
lending, it will be necessary, in addition to the already scheduled transfers
agreed on for the Sixth and Seventh Replenishments, to make yearly transfers
in convertible currencies as needed to fulfill the obligations arising from
the lending program. The transfers would be made from the FSO General Reserve
to the IFF account in the necessary amounts.
F. Currencies
4.15 All of the contributions to the FSO are to be made in freely convertible
currencies. Each member will make its contribution in one of 17 specified
convertible currencies or express their contributions in SDR or ECU, with
payment in one of the specified currencies, based on the average exchange
rates between the dollar, and the selected currencies, the SDR, or the ECU,
for the 180 calendar-day period ending on April 10, 1994. Members are to
designate in advance the currency to be used in making their contributions.
The 17 convertible currencies and their average rates of exchange against
the U.S. dollar for the 180 calendar-day period ending on April 10, 1994,
and the value of the SDR and the ECU in terms of the U.S. dollar on the
same basis are as follows:
