France sees no need for World Bank capital increase

ISTANBUL (Reuters) - The World Bank does not need any extra funding at the moment, French Economy Minister Christine Lagarde said on Sunday.

World Bank members countries are divided over whether or not the bank needs a capital increase and how the funding should be raised. Developing countries are pushing for the move because of credit constraints in global markets and have urged an early agreement on the issue.

World Bank President Robert Zoellick has said the institution could face serious financing constraints by the middle of next year if lending to developing countries continues at its record pace.

He said he would urge member countries at the World Bank's and IMF annual meetings in Istanbul to consider ways to ensure the poverty-fighting institution was well funded.

Lagarde, attending the meetings, said a capital increase was being talked about.

"The bank has a certain number of options and margins for maneuver, which do not justify an increase in capital at the moment," she told reporters. "That is France's position."

World Bank lending has increased sharply as the global economic turmoil spread to developing countries, which at first looked as if they might escape the worst of the crisis.

In spring last year, World Bank member countries asked the institution to scale up lending by $100 billion over three years to help developing countries weather the downturn.

Now Zoellick said demand would far exceed that amount, not only as developing countries are forced to deal with ramifications from the global economic crisis, but also with new development challenges such as climate change.

"Given the size of projected demand associated with the current crisis, the Bank needs a general capital increase and we urge members to come to an early agreement," Indonesia's Finance Minister Sri Mulyani Indrawait said in a statement to the World Bank's Development Committee meeting on Monday.

(Reporting by Anna Willard and Lesley Wroughton; Editing by Ruth Pitchford and Jan Paschal)