- Member countries provide strategic vision and accountability framework
- Bank will expand support to small and vulnerable countries
- Key goals include reducing poverty and inequality, promoting regional integration and sustainable energy, helping countries tackle climate change
At the end of a 60-day voting period, the Board of Governors of the Inter-American Development Bank offered broad support for the approval of the financial terms for a $70 billion increase of the Bank’s ordinary capital. This would be the largest expansion of resources in the IDB’s history.
Once the vote, which ended on Wednesday, is formally tallied, the agreement initiates the process for member countries to individually approve the resolutions implementing the capital increase.
Upon completion of this process, the capital increase would include more funds for the IDB’s poorest members and an unprecedented package of financial support for Haiti.
The agreement establishes development priorities and goals for the IDB. It strengthens the Bank’s mechanisms to ensure evidence of the development impact of its support to countries.
It is expected that the capital increase will enable the Bank to lend, on average, approximately $12 billion per year, double its pre-crisis levels. It would pave the way for the IDB to forgive all of Haiti’s outstanding debt with the Bank and provide the country with more than $2 billion in grants over the next decade. In addition, it would ensure the sustainability of the Bank’s concessional lending window, known as the Fund for Special Operations (FSO). The FSO’s needs will be reviewed by Governors before 2020.
“The capital increase will allow the IDB to pursue an ambitious agenda over the next decade focused on the most urgent development challenges facing Latin America and the Caribbean,’’ said IDB President Luis Alberto Moreno. “The extensive reforms that have led up to this capital increase have turned the IDB into a more responsive, transparent and accountable institution that is in an excellent position to help promote growth and economic opportunity across the hemisphere.”
The Bank will continue to engage small and vulnerable countries, with 35 percent of total lending to this group by the end of 2015.
Lending in support of climate change adaptation initiatives as well as projects in renewable energy and environmental sustainability is expected to reach 25 percent of total lending, from an average of 5 percent in the past three years.
Lending for poverty reduction and equity enhancement programs is expected to increase to as much as 50 percent of the Bank’s total lending by the end of 2015.
The IDB’s support for integration and trade-related programs is expected to increase three-fold, to 15 percent of total lending.
The agreement calls for the capital increase of the IDB to be subscribed over a five-year period beginning in 2011. A total of $1.7 billion would be subscribed by shareholders in paid-in capital during this period. The remaining $68.3 billion would be in the form of callable capital, which are pledges by member countries and do not represent cash outlays.
This increase in resources would take the total subscribed capital stock of the Bank (both paid-in and callable) to more than $170 billion, maintaining the IDB as the largest source of multilateral finance to Latin America and the Caribbean and the largest of all the regional development banks.
Commitment to Greater Transparency and Accountability
The agreement establishes a results framework with indicators to monitor the effectiveness of the Bank’s programs. The framework defines specific outputs the Bank is expected to achieve by 2015 to contribute to the Region’s progress toward its key development goals. These outputs include providing improved access to quality education to a larger number of students, increasing households with new or upgraded water supplies and expanding the power generated from low-carbon emission sources.
The IDB is committed to support programs that demonstrate achievable results. To monitor the progress in achieving these results agreed by Governors, management will report annually on the progress towards the goals of the General Capital Increase. To ensure greater accountability, the Bank approved earlier this year a new access to information policy that provides greater transparency on the effectiveness of IDB operations and the outcomes of Board proceedings.