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European stocks
rose modestly and the euro halted its decline Thursday, a day after the
International Monetary Fund promised to increase the 45 billion-euro
aid package for Greece to as much as 120 billion euros over three years
to quell the fund’s biggest crisis since the Asian woes of 1997.

The fund is racing
to conclude an agreement for more painful austerity measures from
Greece by Monday, clearing the way for the government to receive
funding and reassuring investors worldwide that European debt is safe.
On Wednesday, Dominique Strauss-Kahn, the I.M.F.’s forceful managing
director, made the higher aid pledge in a private meeting with German
legislators. The package would be the equivalent of up to $160 billion
and would come from both the I.M.F. and from other countries using the
euro.

But as has
frequently been the case during Europe’s debt crisis, the promise of
help was overshadowed by more disturbing news – in this case a cut in
the debt rating of Spain by a major agency just a day after downgrades
for Portugal and Greece.

The growing fear is
that the fallout from Greece and even Portugal – which together compose
just 5 percent of European economic activity – could be a mere sideshow
if Spain, with its much larger economy, has difficulty repaying its
debt.

In European morning
trading, the euro was at $1.3237, up slightly from $1.3220 late
Wednesday in New York. The Euro Stoxx 50 index, a barometer of
euro-zone blue chips, rose 0.8 per cent, and the FTSE-100 index in
London rose 0.5 per cent.

Trading in U.S.
index futures suggested Wall Street stocks would open slightly higher,
after the Dow Jones industrial average rose 53 points Wednesday to
close at 11,045.27.

Most major Asian
markets fell, with both the Hang Seng index in Hong Kong and the
S&P/ASX 200 index in Sydney dropping 0.8 per cent. Tokyo markets
were closed for a holiday.

In many ways, the
current troubles in Europe go to the heart of the fund’s new mission to
serve as a firewall in the financial crisis – an objective that was
bolstered by $750 billion in fresh capital from Group of 20 countries
last year.

Unlike its previous
efforts in smaller, emerging economies in Asia in 1997, and more
recently in Hungary, Romania, Latvia and Iceland, the fund has been
hamstrung in its efforts to act quickly and decisively by political
concerns within the European Union, which insists on assuming a leading
role.

“It is a problem,”
said Alessandro Leipold, a former acting director of the I.M.F.’s
European department. “It should not be that difficult – they did it in
Hungary and Latvia. But the egos are different in industrialized
countries.”

A stitch in time

A case can be made
that if Greece had sought help from the fund late last year after the
forecast for its budget deficit doubled, the amount of support needed
to reassure investors would have been much less than the 120 billion
euros that even now might not be enough.

In that vein, Mr.
Leipold said Portugal and Spain should ignore any stigma associated
with an I.M.F. program and make the case to the European Commission in
Brussels that asking proactively now for aid would soothe skeptical
markets and save Europe billions in the future.

“The market has seen its worst fears come true,” he said. “What it needs is a surprise on the upside.”

Concerns have
already surfaced in Congress that the broad demands of the sovereign
debt crisis will quickly exhaust the I.M.F.’s reserves and leave the
United States, the fund’s largest shareholder, with the bill.

Representative Mark
Kirk, a Republican from Illinois, said such a drain could occur if
Portugal, Ireland and Spain sought I.M.F. aid at the same time. Mr.
Kirk worked at the World Bank during the 1982 debt crisis in Mexico,
which came close to depleting the fund’s reserves.

“We have seen this movie before,” he said. “Spain is five times as big as Greece – that would mean a package of 500 billion.”

Mr. Kirk sits on
the House Appropriations Committee that oversees I.M.F. funds and said
that he had already asked for hearings on the fund’s ability to handle
a European collapse.

In Athens, the
Greek government had no choice but to seek an I.M.F. solution after its
costs of borrowing skyrocketed, but that has not made the negotiations
for aid any easier.

The fund has sent
one its most senior staff members, Poul Thomsen, who has overseen
complex fund negotiations in Iceland and Russia, to assist Bob Traa,
the official responsible for Greece, to work out a solution.

According to people
who have been briefed on the talks, the aim is to secure from Greece a
letter of intent for even deeper budget cuts than the tough measures
imposed so far, like reductions in civil service pay, in exchange for
emergency funds.

With Greece now
shut out of the debt markets, it has little leverage to resist –
especially in light of the 8 billion euros it needs to repay
bondholders on May 19. Analysts expect a deal by next week at the
latest.

It is a bad sign
when markets are led by rumour. For the prudent investor, simply
staying up to date with the array of overland information sources on
public companies can be a full-time job. To add subterranean and back
alley news filtering to that workload is an unwelcome prospect. Yet,
sometimes, it almost seems as if that is where we are. In the last two
months, I have received material information about two major companies,
which are yet to issue any official statement on the events long after
they surfaced in the public domain. While companies are within their
prerogative in declining to respond to rumours, that is a poor excuse
and unforgiveable disservice to the trust that shareholders place in
them for transparency. Evasiveness will not cut it.

The first piece of
news had to do with the departure of the chief executive of a leading
conglomerate, and the second with a case of massive fraud at a leading
bank. Both companies have been studiously silent on these events,
leaving investors to grope in the dark for the true situation. Such
deliberate disdain for disclosure inclines the hasty to believe the
rumours. Worse, it besmirches the reputation of the boards at these
companies as unaccountable, implicated, and haughty.

On March 8, 2010,
an acquaintance informed me that Nosike Agokei, the chief executive
officer of John Holt, one of the oldest companies on the Nigerian Stock
Exchange, who was only appointed to that position in August 2009, may
have resigned from the company in unclear circumstances. Still
unconfirmed are stories that Agokei resigned over the overbearing
interference of non-executive board members and the disfavourable terms
of partnership with its UK-based parent. Whatever the reasons for his
departure, if indeed it is true, the company ought to have made a
formal statement notifying the public of the change at the top and
which officer will fill that office till a substantive appointment is
made.

Malfunctional corporate communications

The company’s
failure to do so is indicative of malfunctional corporate
communications and governance mechanisms. Right now, the link to
Agokei’s profile page on the John Holt website,
http://www.jhplc.com/corporate/directors/board-nagokei.php, returns a
404 error page, while the Management Page at
http://www.jhplc.com/corporate/management.php is blank. Similarly,
Nosike Agokei’s name has been removed from
http://www.jhplc.com/corporate/main-board.php , which lists the names
of board directors. I am unwilling to believe that the erasures are due
to accidental deletions by the website administrator.

Five weeks later,
on April 13, 2010, I received a Google alert from Zenith Bank with the
title, ‘Board Room Crises Rocks Zenith Bank as Zenith Manager Defrauds
Bank of N4.5Billion.’ The link, which led to a story on the Sahara
Reports website, exposed a mind boggling fraud of several billions at
one of the bank’s Abuja branches. Five days after that email alert, a
national daily carried the headline ‘N7.4bn fraud rocks Zenith Bank’,
inflating the original sum by close to N3 billion.

Although both
reports say that the bank’s management has reported the matter to the
police, its refusal to issue a statement on the situation, no matter
how terse, has left room for speculation. Currently, customers and
investors are asking several questions about Zenith Bank’s internal
controls, branch supervision, and risk management. When did the bank
become aware? Was the fraud committed over a single transaction or over
a series? This crescendo will not die down so easily.

Agent-principal dissonance

Generally,
agent-principal dissonance is most pronounced in the sphere of
information. However, while developed jurisdictions have taken bold
steps to ensure that the asymmetry is flattened, Nigerian companies and
regulators continue to act like it is all good.

In fact, because
they have been kept in the dark for so long, investors do not even know
that they should hold companies responsible to update them on certain
types of information. Disclosure is not a favour. It is not at
companies’ discretion. It is not a ‘dash’. It is a duty and the mark of
responsibility.

Disclosure has real
world implications on the cost of a company’s capital and valuation.
Good disclosure practices benefit both companies and their investors,
while bad disclosure culture hurts both, leading investors to price
risk wrongly thus misallocating assets, and hamstringing companies from
accessing the funds they need at attractive rates to fund their
operations and growth. In the end, the market suffers and everyone is
worse off.

In the past year,
there has been a lot of auditioning about the need for greater
disclosure among companies. Sadly, it appears that while the regulators
and boards may have crammed the lyrics, they have not learnt the
melody. Even if both companies issue statements today, they would still
have fallen short because disclosure is nothing if it is not timely.
Peer exchanges like the London Stock Exchange recognise this need by
providing services like the Regulatory News Service (RNS) for prompt
dissemination.

Our rejoicing at
the first wave of disclosure that swept through the banking sector
should not blind us to the fact that transparency is not limited to
financial statement matters or toxic assets alone. Admittedly, while
the journey has started, it is ‘not yet uhuru’. We still have many
rivers to cross. Let us hope we can find our way home.

The writer is the managing director of a full service investor relations firm based in Lagos.

Nigeria’s First Bank said on Friday it planned to form a listed holding
company which will own the bank and its subsidiaries to comply with reforms to
the sector planned by the central bank.

Chief Strategy Officer Onche Ugbabe said the bank would likely be de-listed
to be replaced on the stock exchange by the group holding company. He gave no
timeframe.

“The group holding company will be the listed entity and will be 100
percent owner of the bank, as well as of the other subsidiaries,” Ugbabe
told an investor conference call.

Central Bank Governor Lamido Sanusi has said he intends to do away with the
universal banking model and separate banks’ core lending business from more
speculative capital market activities — such as stockbroking, asset
management, private equity and venture capital.

First Bank is one of Nigeria’s first lenders to clarify how it plans to
comply with the central bank’s reform agenda. Others have said they plan to spin
off subsidiaries but have not yet given details.

Chief Risk Officer Remi Odunlami said First Bank was targeting 10 percent
growth in its loan book this year, with the focus on long-term credit.

“We have a liquidity ratio of 45 percent which means we have excess
liquidity and that will be channelled to loans,” Odunlami told the call.

The central bank has said it is concerned about banks’ reluctance to lend in
sub-Saharan Africa’s second-biggest economy and has kept its benchmark interest
rate on hold at 6 percent for months to try to stimulate the flow of credit.

First Bank swung to a pre-tax profit of 15.4 billion naira in the first
quarter of this year from a loss of 9.8 billion naira a year earlier.

The bank said it was targeting 20 percent return on equity in 2010, up from
15.9 percent at the end of March.

REUTERS

Already facing investigations on two fronts into
its practices in the mortgage market, Goldman
Sachs came under pressure from investors as well on Friday.

After reports on
Thursday evening that federal prosecutors had opened an investigation into
trading at Goldman, raising the possibility of criminal charges against the
Wall Street giant, the firm’s stock was downgraded on Friday by two analysts. Standard
& Poor’s lowered its rating from hold to sell, and Bank
of America Merrill
Lynch dropped its rating from buy to neutral, citing the mounting
investigations.

Investors
responded by sending the stock down 9 percent in midday trading, to $145.89,
contributing to an overall decline in financial shares on Wall Street.

The financial
impact of Goldman’s troubles continues to mount. Since the Securities
and Exchange Commission announced on April 16 that it had filed a
civil fraud suit against the firm, its stock is down 20 percent, removing
about $20 billion from its market capitalization. The drop is all the more
striking given that Goldman delivered a blockbuster
quarterly report last week, with first-quarter earnings doubling from last
year.

Goldman has
vigorously denied the accusations by the S.E.C., which accused the firm of
defrauding investors involved a complex mortgage deal known as Abacus 2007-AC1.

On Thursday
evening, people familiar with the matter said the S.E.C. had referred its
investigation to prosecutors for the Southern District of New York, which has
now opened its own inquiry. While the investigation was said to be in a
preliminary stage, the move could escalate the legal troubles swirling around
Goldman.

Federal
prosecutors would face a higher bar in bringing a criminal case against
Goldman, whose role in the mortgage market came under sharp scrutiny this week
during a marathon hearing in the Senate. In contrast to civil cases, the burden
of proof is higher in criminal ones, where prosecutors must prove their case
beyond a reasonable doubt.

The stakes are
high for Goldman, but they are also high for the United States attorney’s
office. Prosecutors from the Eastern District of New York lost a case last year
filed against two hedge fund managers at Bear
Stearns, whose collapse presaged the turmoil on Wall Street.

Prosecutors
built much of that case around internal e-mail messages at Bear Stearns, much
the way the S.E.C. and senators have pointed to e-mail messages at Goldman in
which employees had disparaged investments that they were selling to their
customers.

In the end,
however, prosecutors were unable to
prove to a jury any criminal wrongdoing by the Bear Stearns employees.

A spokesman for
Goldman declined to say whether the bank knows about a criminal case, but he
said “given the recent focus on the firm, we’re not surprised” to
learn about a criminal inquiry. The spokesman said Goldman would cooperate with
any investigators’ requests for information.

A spokeswoman
for the Southern District also declined to comment.

The opening of
the Justice Department investigation was first reported Thursday evening by The
Wall Street Journal’s Web site.

Goldman has said
it will defend itself against the S.E.C.’s accusations. The firm’s executives
discussed the case last week during their quarterly earnings call, and this
week, they testified about their mortgage operations in a nearly 11-hour
hearing in Washington before a Senate subcommittee.

That hearing
focused broadly on Goldman’s mortgage operations, and the Senate subcommittee
released reams of new internal documents from Goldman. The Senate Permanent
Subcommittee on Investigations is looking into many other mortgage deals beyond
the one cited by the S.E.C.

The deal at the
heart of the S.E.C. case was one of 25 mortgage securities that Goldman created
in a program it called Abacus. The agency has hinted that it may expand its
inquiry to other Wall Street firms.

Those securities
were synthetic collateralized
debt obligations, which are bundles of derivatives that mimic the performance of mortgage bonds. The securities allowed people who
believed that the housing market would collapse to buy insurance against
certain mortgage bonds they thought might fail. When those mortgage bonds did
fail, the investors in the Abacus deals suffered major losses.

The Abacus deals
were, however, very profitable for the parties that were negative on the
housing market. In the Abacus 2007-AC1 deal, the hedge fund manager, John
A. Paulson, raked in about $1 billion when the bonds he helped select hit
trouble.

Mr. Paulson has
not been named in the S.E.C.’s case because he was not involved in marketing
and selling the deal.

Many in Congress
have been pressing for a criminal inquiry. This week, 62 House members sent a
letter to the Justice Department asking it to conduct an investigation into
Goldman’s actions.

© The New York Times

The
federal government yesterday directed the Joint Tax Board (JTB) and the
Federal Inland Revenue Service (FIRS) to eliminate all forms of
multiple taxations from the country’s tax jurisdiction.

Minister
of State for Finance, Remi Babalola, who gave the directive at the
122nd meeting of the JTB in Abuja, emphasised the need for government
to continue pursuing good tax policy and administration in the country
as a vital part of strong economic management.

Mr.
Babalola listed advantages the country offers investors as a leading
financial centre to include a politically stable environment, a robust
regulatory system with good corporate governance standards, and a
dedicated workforce yet relatively cheap, pointing out that there is
need for the country to justify that recognition in Africa.

“The
country cannot afford to take these advantages for granted. All forms
of double taxation must be eliminated in our various jurisdictions,” he
said. “For the country to secure a position as a financial services
centre, we must strive to have an internationally competitive tax
system.

“Achieving
international competitiveness is not about reducing our tax rates to
the lowest in the world. Rather, we should focus on identifying and
removing barriers to the effective tax administration as well as strive
towards a system that is not only open and transparent, but providing
clarity and certainty, while maintaining integrity.”

All tax payers

Urging
the two institutions to ensure that they capture all predominantly
untaxed, yet potential and eligible taxpaying groups in the country,
the minister observed that the nation’s tax administrators still exist
largely in the era of ‘arm-chair revenue collection’, adding that a
situation where Federal Government employees are under-taxed as a
result of this cannot be justified by any explanation.

“The
expenses of government to the citizens of a great nation like ours, are
like the expenses of management to the joint tenants of a great estate
who are all obliged to contribute in proportion to their respective
interests in the estate. The Board should spare no efforts at
galvanising support for the various tax authorities to reach out and
capture our predominantly untaxed, yet potential and eligible taxpaying
group,” he said.

Effective
administration of the various extant tax policies, according to Mr.
Babalola, will help shape Nigeria’s economic future, improve
productivity and enhance competitiveness, adding that “It will lift our
Gross Domestic Product (GDP) so that Nigerians are better off. It has a
way of fighting the corruption virus in our system and it can deal with
intergenerational issues in a way that ensures a sustainable future.”

Decrying
the persistence of revenue leakages in the system, Mr. Babalola charged
the tax board to put in place measures to block the leakages of revenue
nationwide as well as ensure improvements in the willingness, accurate
declaration of tax liabilities and collection of tax from the populace.

The
board is composed of representatives of the Federal Inland Revenue
Service (FIRS), states internal revenue services/state boards of
internal revenue, as well as revenue agencies like the Nigerian Customs
Service (NCS), Federal Roads Service Commission (FRSC) and the Revenue
Mobilisation Allocation and Fiscal Commission (RMAFC).

Its
chairman, who is also the executive chairman of the FIRS, Ifueko
Omoigui, said the JTB has not only discharged its role in ensuring
uniformity in the administration of personal income tax (PIT) in the
country, providing a forum for speedy resolution of conflicts between
members as well as providing advisory services to government on tax
matters in the last decade, but also facilitating the implementation of
tax reforms, including amendment of tax laws to address current
realities in the system.

Personal income tax

On
alleged introduction of new personal income tax by government, Mrs.
Omoigui denied any such decision, saying any increment in tax is
payable strictly in compliance with the ongoing reforms, adding that
the current ratio of about 6 percent of internally generated revenue
(IGR) to total revenue bears out the reality that 90 percent of the
taxes come from the pay as you earn (PAYE) mechanism.

She
called for the passage of the outstanding tax Bills before the National
Assembly, adding that government should grant increased administrative
and financial autonomy to state internal revenue services, establish
effective statistical database to facilitate future identification and
determination of tax administration-related issues as well as take
steps to curb the menace of multiple taxation at the federal, state and
local government levels in the country.

Nigeria’s United Bank for Africa (UBA) (UBA.LG)
said on Monday pre-tax profit fell 56 percent to 5.3 billion naira ($35
million) in the first quarter, according to an announcement to the stock
exchange cited by brokers.

Gross earnings for the 3-month period fell to 48.2 billion naira from
57.3 billion a year earlier.

Cadbury Nigeria (CADBURY.LG)
said on Monday its net loss more than halved to 1.2 billion naira ($8 million)
last year from a 2.75 billion naira loss in 2008 while turnover rose around 5
percent.

The firm also said it had paid off bank debts, which helped drive it to
a loss in 2008, following the successful conclusion of a rights issue. It said
senior Nigerian banker Atedo Peterside had been appointed as its new chairman.

Against the
background of failing states, increasing lack of transparency in
governance and depleting trust in its budget implementation, experts
have urged governments at various levels to actively involve the masses
in their budgeting and implementation processes if they indeed desire
to facilitate the empowerment of the people.

This, they say, can
be achieved through the actual promotion and implementation of economic
literacy programmes at the grass root levels, the “politicising of
economic knowledge”, building existing knowledge of the communities,
the promoting of the understanding of economic process, and empowering
communities to take action to access decision making machinery.

Break it down

At the 5th edition
of the International Economic Literacy and Budget Accountability for
Governance (ELBAG) training organised by Action Aid, Finance Analysts
and guest lecturers urged the government to actively and effectively
involve the participation of the masses for better government.

The event had a total of about 44 participants from 13 countries in Europe, Africa and Asia in attendance.

“Unless the people
understand the details of budgeting, they cannot effectively hold the
government accountable,” the country manager of Action Aid, Husseni
Abdu, said during the training in Lagos yesterday.

“The economy is an
important space for the poor. It is important to begin to break down
economies to allow people understand before they can actually engage
and challenge governance.”

According to him,
the announcement of increase in the nation’s Gross Domestic Product
(GDP) and fall in inflation among other economic indices, without the
expected corresponding improvement in the welfare of the people, shows
that there is a disconnect somewhere.

Training objectives

Mr. Abdu said the
programme, titled International Economic Literacy and Budget
Accountability for Governance (ELBAG), is seeking to address the
disconnection between local, national and international level,
facilitate the empowerment of the people, ensure participation of the
poor and excluded, reduce corruption, and increase accountability in
the process of governance and policy making, particularly with regards
to budget formulation, economic planning and government decision making
among others.

Otive Igbuzor, an
international activist who was also present at the event, said there is
a relationship between budgets and poverty in an economy, and therefore
it is necessary that the challenges to budget formulation and its
implementation be identified if poverty eradication must be achieved.

“Budget is the most
important instrument of governance, apart from the constitution,” Mr.
Igbuzor said. “The general focus on budget has increased in recent
years. As democracy increases, the legitimacy of government decreases.
A budget is the statement of government estimated revenue and proposed
expenditure, a key instrument for macroeconomic management and is
supposed to perform fiscal functions of allocation, stabilisation, to
influence level of employment, prices, economic growth and distribution
of income and wealth.”

A huge number of
African countries score low in human development index, gender index
and environmental perfection indexes but are high on consumption, he
said. “We hope to be able to train a set of action aid staff who have a
very good understanding on budget and budgetary projects on how to use
budget to transform governance so that when they get back to their
respective communities,” he said. “They can also in turn, enable the
people there to be able to engage the government of their community. It
is a regular thing we have every year and the shifts run between
Nigeria, India and other countries.”

According to him,
the impact of the trainings (usually held yearly) is measured by the
level of people’s engagement with the government in our various
countries, to ensure improvement in government transparency in
governance. The next training is expected this time next year.

The process

Action Aid is an
international organisation present in many countries in the world.
ELBAG is one of the programmes run by the organisation, directed at
increasing people’s understanding of the economy and governance.

It is a process and
a methodology framework that combines organising people, developing
grassroots monitoring mechanisms, democratising knowledge, using
participatory tools and methods for building public accountability and
transparency to initiate people-centred advocacy process.

It creates a space where people can discuss economics and use it as an entry point to build democracy and governance.

Ultimately, the intention of t he programme is to propel accountability and promote transparency..

Operators in the
maritime industry have been promised a good time, as the proposed
Petroleum Industry Bill (PIB) is said to be designed to promote
economic activities among Nigerian ship owners who participate in the
freighting of crude oil in and out of the country.

The Nigerian
National Petroleum Corporation (NNPC), in a statement on Monday, signed
by Levi Ajuonuma, its group general manager in charge of Public
Affairs, said Shehu Ladan, group managing director of the NNPC, gave
the assurance at a reception organised by the Indigenous Shipowners
Association of Nigeria (ISAN), in Lagos.

Mr. Ladan said that
the PIB, if passed into law, would provide a conducive business
environment for ship owners involved in the oil business; assuring them
of his readiness to ensure that their investment is boosted through a
synergy between them and the Corporation.

“I want to assure
you that NNPC under my tenure would do whatever it takes to support
Shipowners of Nigeria origin to get returns on their investment. While
in the saddle, shipowners will not fail. I believe this would give the
Nigerian flagship its pride of place in the maritime industry,” the
NNPC boss said at the event, which was held in his honour and two other
members of the executive council of the federation.

The other two honourees are the Minister of Interior, Emmanuel Ihenacho, and the Minister of Transport, Yusuf Sulaiman.

Mr. Ladan applauded
ISAN for the honour done them and solicited for their collaboration
with the Corporation to sustain the effective export and import of
petroleum products.

Dividends of democracy

Presenting his
remarks, the Chairman of ISAN, Isaac Jolapamo, felicitated with the
honourees for their appointments and described them as “round pegs in
round hole.” He assured them of the association’s partnership and urged
them to use the little time left for them to deliver the dividends of
democracy to the shipping industry.

Mr. Ihenacho, the
Minister of Interior and one of the honourees, while addressing the
gathering, pledged his commitment to the growth of the maritime sector
in the country, adding that “indigenous shipowners would be encouraged
to participate more in the freighting of crude products.”

The president of
Lagos Business School, Pat Utomi, a professor of Political Science,
congratulated the honourees and described ISAN as one professional
association that has provided expertise, and capable of making the
Nigeria economy one of the greatest economies by year 2020.

The event was
graced by the former chief of general staff, Mike Aikhigbe; the
governor of Lagos State, Babatunde Fashola, who was represented by his
Commissioner of Environment.

Members of the
World Bank agreed at the weekend to support a $5.1 billion increase in
its operating capital, the largest increase in general financing since
1988, and to give developing economies a greater say in running the
anti-poverty institution.

Under the changes,
China will become the bank’s third largest shareholder, ahead of
Germany, after the United States and Japan. Countries like Brazil,
India, Indonesia and Vietnam will also have greater representation.

“We are grateful to
our shareholding countries for this strong vote of confidence,” the
bank’s president, Robert B. Zoellick, said at the conclusion of the
spring meetings of the World Bank and the International Monetary Fund.

The bank’s 186
members also agreed to support a reform package that calls for greater
openness and disclosure of information and improvements in managing
risks and measuring results.

The World Bank has
made $105 billion in financial commitments since July 2008 in response
to the global economic turmoil. The new capital in essence, allows the
World Bank to maintain its programs at their level before the crisis.

“We could start to
see this last year, at the time of our annual meeting, that unless we
could get additional capital infusion, we wouldn’t be able to continue
this high lending volume,” Mr. Zoellick said in an interview on Friday.
“And indeed, even coming out of the crisis, we would be in a position
where we’d have to come back below precrisis levels.”

In a Global
Monitoring Report, released Friday, the bank reported that the economic
crisis had slowed the pace of poverty reduction in developing
countries. As a result of the crisis, 53 million more people will
remain in extreme poverty by 2015 than otherwise would have, the report
found. Even so, the report projected that the number of people in
extreme poverty – defined as living on less than $1.25 a day – would be
920 million in 2015, a significant decline from the 1.8 billion in 1990.

Some developing
countries sought a bigger capital increase, as other development banks
have received. But the wealthier nations, which are squeezed, resisted
such a move.

Timothy F.
Geithner, the United States Treasury secretary, said Mr. Zoellick had
“made a strong and compelling case” for the money that was approved. He
pledged to seek Congressional support for the United States’ share of
the capital increase, $586 million or about $117 million a year for
five years.

“For every dollar
the United States contributes to paid-in capital for the World Bank,
$26 worth of assistance is delivered,” Mr. Geithner said Sunday.

Mr. Zoellick carefully devised the capital increase and voting changes to be adopted together.

The $5.1 billion in
so-called paid-in capital, which the bank can use for day-to-day
operations, will bring the bank’s cash on hand to about $40 billion. Of
the $5.1 billion, developing countries will contribute $1.6 billion in
connection with a shift in representation that will give them 47.19
percent of voting power, up from 44.06 percent. The actions fulfill a
pledge the bank’s members made in Istanbul in October.

In 2008, the bank’s
members approved a smaller shift of 1.46 percent of voting power to the
developing countries from the wealthy ones and added a 25th seat on the
bank’s governing board, raising to three the number of seats for
sub-Saharan Africa.

All told, the
cumulative shift of 4.59 percent of voting power amounts to the
greatest realignment in representation at the World Bank since 1988.

“As the developing
countries gain more shares, they have to pay for them,” Mr. Zoellick
said in the interview. “Part of the good story here is a burden-sharing
story.” The bank’s members approved on Sunday an $86.2 billion general
capital increase, bringing the bank’s total subscribed capital, not
counting about $26 billion in reserves, to $276.1 billion. But except
for the $5.1 billion, that new money is “callable capital,” which
resides with the member countries but can be drawn upon in an
emergency. (The bank has never had to do so.) The callable capital lets
the bank enjoy a top-notch credit rating and borrow at favorable rates.
All but roughly $40 billion of the $276.1 billion is callable.

The bank’s members
said it should redouble its focus on helping the poor, especially in
sub-Saharan Africa; invest in agriculture and infrastructure; promote
global “collective action” on climate change, trade and other
priorities; combat corruption; and prepare for crises.

Mr. Zoellick, who
served as the United States trade representative and then as deputy
secretary of state under President George W. Bush, said in the
interview, that the less wealthy countries were leading the global
economic recovery, while the United States, Europe, and Japan had
rebounded more slowly.

“A lot of growth is
coming from the developing world, and so the financing we do in the
developing world is now beyond charity and social solidarity – it’s a
question of self-interest,” he said. “They have become sources of
demand.”

The New York Times