By Zainab Joaque, Reporting from Washington DC
Washington DC, USA – During the Spring Meetings, the World Bank unveiled an innovative financial tool designed to amplify lending capacity, receiving support from a coalition of countries pledging a total of $11 billion. This initiative aims to leverage resources and address shared global challenges, with Japan leading the way as the first contributor.
The Portfolio Guarantee Platform, hybrid capital mechanism, and new Livable Planet Fund have garnered commitments from 11 countries, marking a significant endorsement for the World Bank Group’s efforts to boost lending capacity. These financial instruments are poised to unlock up to $70 billion in financing over the next decade.
Underpinning this initiative is the World Bank Group’s unique leveraging capability, which can multiply donor funds six to eight times over 10 years, and potentially up to tenfold under certain conditions. This innovative approach allows for greater risk-taking to tackle pressing global issues.
Belgium, France, Japan, and the United States have pledged support to the Portfolio Guarantee Platform, while Denmark, Germany, Italy, Latvia, the Netherlands, Norway, and the United Kingdom have committed to hybrid capital.
Ajay Banga, President of the World Bank Group, expressed gratitude for the countries’ generosity, emphasizing the transformative impact of these financial instruments. He underscored the importance of these contributions in advancing the Bank’s mission to improve lives globally.
The initiative stems from a series of reforms implemented by the World Bank Group as part of the Capital Adequacy Framework review, recommended by the G20 Expert Group. These reforms include adjusting loan-to-equity ratios, increasing bilateral guarantee limits, and maximizing callable capital benefits.
Furthermore, the introduction of hybrid capital provides shareholders and partners with opportunities to invest in bonds with special leveraging potential. The Portfolio Guarantee Platform offers a shared approach to risk, making World Bank financing more accessible.
In addition to these measures, the World Bank Group has launched the Livable Planet Fund to incentivize cross-border cooperation and address shared challenges. This fund will support projects that provide global benefits and facilitate collaboration among governments, philanthropies, and other partners.
To ensure accessibility and affordability, the World Bank Group has introduced 50-year loans at no additional cost for borrowers and reduced interest rates for projects addressing global challenges. These initiatives underscore the organization’s commitment to fostering sustainable development and addressing pressing global issues.
As the World Bank Group continues to innovate and expand its lending capacity, these commitments underscore a shared commitment to addressing global challenges and advancing inclusive development worldwide. ZIJ/22/4/2024