World Bank: 11 countries have pledged $11bn to new financing tools

The World Bank Group says new financial instruments designed to boost lending capacity and enable it to take on more risk for shared global challenges have received a significant endorsement.

According to a statement on April 19, a group of 11 countries announced commitments for the portfolio guarantee platform, hybrid capital mechanism, and new livable planet fund totalling $11 billion.

“The World Bank Group’s unique leveraging capability enables the resources pledged to hybrid capital and the Portfolio Guarantee Platform to be multiplied six to eight times over 10 years. Under certain conditions, the leverage amount could reach tenfold,” the World Bank said.

“The resources pledged today could provide up to $70 billion in urgently needed funds, which can be deployed to address cross-border challenges and advance development goals.”

Ajay Banga, World Bank Group president, said the Bretton Woods institution worked hard to “develop these new financial instruments that boost our lending capacity, multiply donor funds, and ultimately allow us to improve the lives of more people”.

He said: “The generosity of these countries is both an endorsement of the progress we have made to reform the Bank, and a sign of their shared commitment to development globally.”

World Bank said Belgium, France, Japan, and the United States committed to the portfolio guarantee platform, while Denmark, Germany, Italy, Latvia, the Netherlands, Norway, and the United Kingdom pledged to hybrid capital.

“Japan is committed to providing the first contribution to the new Livable Planet Fund,” the World Bank said.

World Bank said the hybrid capital allows shareholders and partners to invest in bonds with exceptional leveraging potential.

According to the institution, the portfolio guarantee platform provides a shared approach to risk that will make World Bank financing more widely available.

Also, World Bank said the livable planet fund enables governments’, philanthropies’ and other partners’ contributions to promote cross-border collaboration and address shared issues.

WORLD BANK: WE’VE IMPLEMENTED SERIES OF REFORMS

The World Bank Group said it has implemented a series of reforms and developed innovative financial instruments as part of the capital adequacy framework review, which was recommended by the G20 Expert Group.

The reforms, the World Bank said, include adjusting the loan-to-equity ratio to secure $40 billion from the International Bank for Reconstruction and Development (IBRD) balance sheet over a 10-year period.

The financial institution said it also increased the bilateral guarantee limit by $10 billion.

“The World Bank Group has taken the additional steps to develop IBRD 50-year loans at no additional cost for borrowers. These loans will be utilised for projects that provide cross-border benefits,” the financial institution said.

According to the bank, the reforms also include “working to maximize callable capital benefits by publishing a detailed report for rating agencies to better assess its potential value and the Bank’s financial capacity”.

Additionally, the World Bank said it has developed a mechanism to lower interest rates for projects that address global challenges, which will be partially funded by the livable planet fund.