IDB Capital Raise Falls Short

The IDB board Monday agreed to increase the bank’s ordinary capital by 70% to $170bn, the largest expansion of resources in the multilateral’s history. However the number falls well short of what was recommended last year by a special commission, which said the IDB should boost funding to $230bn-$280bn from $100bn. Nonetheless, the IDB says the capital increase will enable it to double its pre-crisis annual lending to $12bn per year. And a person familiar with the bank’s thinking says that $12bn – up from around $7bn in prior years – was always the target. In addition, the IDB also succeeds in preserving its triple A rating, the source adds. “This is a tremendous vote of confidence in the direction and vision of a reformed and renewed Bank,” says IDB president Luis Alberto Moreno. However, some IDB officials say that a smaller than recommended addition of funds could be taken as a sign of poor shareholder support for Moreno. Of the $70bn capital increase, $1.7bn will be paid in by the bank’s member countries over a 5-year period. The implementation of all new measures taken together will bring $2.2bn in new cash contributions to the bank, says the IDB. Separately, the multilateral has forgiven all of Haiti’s outstanding debt to support its efforts to recover from the January earthquake. The IDB also will provide Haiti more than $2bn in grants over the next decade. Member countries committed to provide $479m to cancel Haiti’s debt, convert Haiti’s undisbursed loans to grants and ensure a full replenishment of the IDB’s Fund for Special Operations.