IDB President Ilan Goldfajn

As governors of the Inter-American Development Bank met Sunday to approve a $3.5 billion capital increase for its private sector arm, IDB Invest, a number of shareholders called for more funds for the public sector bank in order to step up assistance to economies across the region struggling under the weight of growing fiscal burdens and persistently weak growth.   

Pavel Contreras, economy minister of the Dominican Republic, which hosted this year’s IDB’s annual meetings, told LatinFinance that “there are several countries that intend to increase the public capacity of the IDB. The debate has been going on.”  

A number of shareholder countries consulted by LatinFinance have come out in favor of a new round of capital increase for the IDB’s public sector operations.  

“We would support it, of course. We have a very good relationship with the IDB,” said Ashni Singh, finance minister of Guyana. 

“Yes, of course. The IDB wants to emulate [the IDB Invest capital increase] and we support it,” Peruvian finance minister José Arista said. 

Guatemala’s finance minister Jonathan Menkos, meanwhile, said that his country would favor “anything that supports the capacity banks can have to support the development of the region.”  

“We are willing to study this,” he said, adding that “this is something that could be useful.” 

REGIONAL IMPORTANCE

Contreras said that he hoped more countries would come out in favor of a capitalization of the public sector lender. “We do hope that countries can analyze the capitalization increase of the public side of the IDB and take a decision. It is important for the whole region,” he said.  

While the current focus on boosting capacity for the private sector is important, Contreras added that “you also have to open to the public sector, even though we do know that the public sector has its own political challenges to face.” 

The IDB Group’s last capital increase in 2012 boosted ordinary capital by $70 billion, although the paid-in portion of that increase amounted to $1.7 billion over five years.

In contrast, the bank’s board approved a $3.5 billion capital boost for IDB Invest on Sunday, which will increase its lending capacity to up to $19 billion per year from the current roughly $8 billion, the bank said in a statement.  

In addition, the board approved $400 million for the Group’s innovation and venture capital arm, IDB Lab, and signed off on a new institutional strategy that includes upgrading lending tools and developing a results-based approach to its work with member nations, the statement said. IDB president Ilan Goldfajn said the measures will make the Group a “bigger, better and more agile institution.”

In an interview with LatinFinance in September, Goldfajn had left the door open to future capital increases for the public sector lender, noting that IDB Invest would be “getting closer” in size to its larger counterpart “if the IDB does not get its own capitalization in the future.”

While policy-makers this weekend declined to put a figure on any hypothetical capital increase for the public sector bank, economies across the region are facing severe fiscal challenges, which could complicate any push towards additional outlays from the region’s finance ministries.  

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