Support for innovative financial tools could generate up to $70 billion over 10 years
WASHINGTON, April 19, 2024- New financial instruments designed to boost lending capacity and enable the World Bank Group to take on more risk for shared global challenges have received a significant endorsement. A set of 11 countries announced commitments today for the Portfolio Guarantee Platform, hybrid capital mechanism, and new Livable Planet Fund totaling $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 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.
"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."
Belgium, France, Japan, and the United States pledged to the Portfolio Guarantee Platform, while Denmark, Germany, Italy, Latvia, the Netherlands, Norway, and the United Kingdom made commitments to hybrid capital.
Japan is committed to providing the first contribution to the new Livable Planet Fund.
The World Bank Group 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. These reforms include:
- Adjusting the loan-to-equity ratio to secure $40 billion over 10 years from the IBRD's balance sheet.
- Increasing the bilateral guarantee limit by $10 billion.
- 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
- Introducing hybrid capital, giving shareholders and partners an opportunity to invest in bonds with special leveraging potential.
- Developing the Portfolio Guarantee Platform that provides a shared approach to risk that will make World Bank financing more widely available.
- Launching a Livable Planet Fund that enables governments', philanthropies' and other partners' contributions to incentivize cooperation across borders and tackle shared challenges.
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 utilized for projects that provide cross-border benefits. Additionally, we created a system to reduce interest rates for projects that address global challenges, which will be partially funded through the Livable Planet Fund.
