New Financing Tools Receive Major Funding Boost. Over a ten-year period, support for cutting-edge financial technologies might yield up to $70 billion.
April 19, 2024, Washington, D.C – There has been strong support for new financial instruments intended to increase lending capacity and allow the World Bank Group to assume greater risk for common global concerns. Eleven nations made commitments today totaling $11 billion for the new Livable Planet Fund, hybrid capital mechanism, and Portfolio Guarantee Platform.
The resources committed to hybrid capital and the Portfolio Guarantee Platform can be multiplied six to eight times over ten years because of the World Bank Group’s exceptional leveraging capacity. In some circumstances, the leverage amount may increase to ten times.
Up to $70 billion in desperately needed money might be made available by the resources pledged today, which could be used to solve cross-border issues and forward development objectives.
The president of the World Bank Group, Ajay Banga, stated, “We 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,” said Ajay Banga, World Bank Group President. “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.”
While Denmark, Germany, Italy, Latvia, the Netherlands, Norway, and the United Kingdom committed to hybrid capital, Belgium, France, Japan, and the United States promised to the Portfolio Guarantee Platform.
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Japan has pledged to make the inaugural payment to the recently established Livable Planet Fund.
As part of the Capital Adequacy Framework review, the World Bank Group has created novel financial instruments and adopted several reforms that were suggested by the G20 Expert Group. Among these reforms are:
modifying the loan-to-equity ratio to obtain $40 billion from the IBRD’s balance sheet over ten years.
The bilateral guarantee cap has been raised by $10 billion.
releasing a thorough report to rating agencies so they can more accurately evaluate the Bank’s financial stability and prospective worth to optimize the benefits of callable capital.
Presenting hybrid capital, which enables partners and shareholders to purchase bonds with unique possibilities for leverage.
creating the Portfolio Guarantee Platform, which offers a common risk management methodology and will increase the accessibility of World Bank loans.
establishing a Livable Planet Fund to facilitate donations from governments, philanthropies, and other partners to promote cross-border collaboration and address common issues.
The World Bank Group has gone above and above to create 50-year IBRD loans that come with no extra fees for borrowers. Projects with cross-border benefits will make use of these loans. We have developed a mechanism to lower credit rates for global challenges initiatives, which will receive partial funding from the Livable Planet Fund.