The World Bank is making changes designed to increase its lending capacity and to make its loans more affordable.
The International Bank for Reconstruction and Development (IBRD) is lowering its equity-to-lending rate by 1 percentage point to 18%, a move that will generate $30 billion in additional financing.
The action, the World Bank said in a statement Tuesday, in combination with previous changes, “could enable more than $150 billion in additional financing over 10 years.”
President Ajay Banga told Reuters the reforms were recommended in an independent report prepared for the Group of 20 leading wealthy and developing nations. The changes were also something their shareholders, including the United States, called for, the president said.
The lower rate “frees up capacity, our balance sheet, to lend more,” Banga said. “Whenever we are able to responsibly secure additional optimization to IBRD’s balance sheet, we will.”
In 2023, IBRD lowered its equity-to-lending rate from 20% to 19%.
In addition to lowering its lending rate, the World Bank announced it is removing some fees, enabling countries to “borrow money and pay it back more easily.”
It said it is “charging less for loans to smaller countries that need our help the most. … These steps will make our loans easier to get and cheaper to repay.”
The latest changes will not affect its triple-A rating, the World Bank reported.
Banga also told Reuters the World Bank wants to increase its funds for the world’s poorest countries, through the International Development Association, by more than $100 billion and as much as $120 billion.
To reach that goal, however, World Bank shareholders and donor countries would have to increase their contributions from $24 billion to $30 billion, which could be challenging in the current international financial landscape. Denmark, however, has already announced a 40% increase in its contribution.
Some information in this report came from Reuters.
