World Bank to increase capacity to lend by $30b

WASHINGTON — The World Bank voted on Tuesday to change its internal lending guidelines, freeing up $30 billion in additional lending capacity over the next decade to help developing countries and emerging markets grapple with climate change and other global challenges, World Bank President Ajay Banga told Reuters.

Banga said the International Bank for Reconstruction and Development, or IBRD, a development bank administered by the World Bank, would lower its equity-to-lending ratio by 1 percentage point to 18 percent, taking on a bit more risk, as it continues to implement reforms outlined in an independent report prepared for the Group of 20 economies and demanded by its shareholders, including the United States.

The move, coupled with changes in the bank's pricing policies, means the bank will be increasing its lending capacity by a total of $150 billion over the next seven to 10 years through adjustments to its balance sheet, Banga said.

The changes come at a time of mounting global challenges, such as the conflicts in Ukraine and the Middle East, worsening climate disasters and massive levels of government debt. Banga said one of the biggest looming crises was an expected gap of nearly 800 million jobs for the 1.2 billion people who would reach working age over the next 10 years.

Some experts estimate that developing countries and emerging markets will need at least $3 trillion in funding annually to address future pandemics, climate change and other challenges.

The IBRD last changed its equity-to-lending ratio in 2023, dropping it to 19 percent from 20 percent.

Further adjustments

Asked if further adjustments were possible, Banga said the bank would keep looking at new instruments such as hybrid capital and ways to optimize its balance sheet.

The board also approved changes in its fee structure to make it easier for borrowing countries to get loans and then make them cheaper to repay, including discounted pricing for short maturity, seven-year loans and extending IBRD's lowest pricing to more vulnerable small states, the bank said in a statement.

Banga said the World Bank was also pushing to replenish the lender's fund for the world's poorest countries, the International Development Association, by more than $100 billion, adding it was realistic to aim for $120 billion, as some African and Caribbean leaders have suggested.

To reach that total, World Bank shareholders and donor countries would have to boost their contributions from $24 billion to $30 billion, which would be a challenge given the rise of the US dollar and domestic fiscal challenges.

"We're fighting really hard to get through this," he said, noting that Denmark had already announced a 40 percent increase in its contribution and other countries, including Britain and Spain, were considering increases.

He said he was reasonably optimistic that the United States, the world's largest economy, would also contribute "a good number," but gave no details.

Agencies via Xinhua