WASHINGTON: The World Bank approved changes to its lending practices on Tuesday which will unlock an additional $30 billion in much-needed financing for middle-income developing countries.
The Washington-based development lender has been looking for ways to make its balance sheet go further, while also seeking to bring in additional funding from both member countries and the private sector under new president Ajay Banga.
The bank said in a statement Tuesday that it had approved “a package of financial measures” to boost the lending capacity and affordability of the International Bank for Reconstruction and Development (IBRD) — its lending arm for middle-income developing economies. Key among the reforms was the announcement that the IBRD’s minimum equity-to-loans ratio will fall to 18 percent from 19 percent, which will generate $30 billion in additional financing.
By agreeing to lower the equity-to-loans ratio, the bank is allowing itself to squeeze more lending out of every dollar pledged by donors. It said it will also be removing some fees and lowering the cost of some loans to make them “easier to get and cheaper to repay.”
“These new financial measures will boost our lending capacity and enable us to drive meaningful change in the lives of people,” Banga said in a statement.
“Our Equity-to-Loans change is the latest step of sustained effort, and whenever we are able to responsibly secure additional optimizations to IBRD’s balance sheet - we will,” he added.
The changes will not affect the IBRD’s coveted triple A rating, the World Bank said, adding that this had been made possible thanks to new protections which include a strengthened system to monitor its credit score.
The reforms announced Tuesday bring the total amount of additional financing unlocked by recent reforms to more than $150 billion over 10 years, the World Bank announced.
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