In October, the World Bank Group proposed a $60.1 billion capital increase for the International Bank for Reconstruction and Development (IBRD), the World Bank’s middle-income lending arm, and a $5.5 billion increase for the International Finance Corporation (IFC), its private sector arm (see Observer Summer 2018). The increase, which would triple IFC’s capital base from $2.57 billion to $8.2 billion, is still to be approved by US Congress.
In return for the capital increase, the IFC has agreed to increase the proportion of its investments in International Development Association (IDA) – the Bank’s low-income lending arm – countries and fragile and conflict-affected states to 40 per cent of its portfolio by FY30. However, there are concerns about IFC’s ability to comply with these requirements. In 2016, only about 2.6 per cent of IFC investments were in IDA countries and it is not clear whether there are enough viable investment opportunities in these countries. The increased IFC presence in these settings could lead to further erosion of its ability to ensure the development impact of its investments (see Observer Summer 2018).
In an April statement, US Representative Maxine Waters, chair of the US House Financial Services Committee, also noted concerns about the IFC’s engagement in IDA countries: “The PSW [IDA’s Private Sector Window] is likely to prioritize financial returns over positive development impacts, which will be difficult to monitor…unless these transfers stop, or at a minimum are competitively based and fully transparent down to the amounts and purpose of aid going to which firms and projects, the Administration’s request for Congress to authorize the IFC’s general capital increase will not be a Committee priority.”