The World Bank Group has unveiled a series of financial measures aimed at enhancing its lending capacity and making loans from the International Bank for Reconstruction and Development (IBRD) more accessible. These steps are expected to enable over $150 billion in additional financing over the next decade.
A significant component of this package is the reduction of the minimum Equity-to-Loans ratio from 19% to 18%, which is anticipated to generate an extra $30 billion in financing. The changes also include adjustments in loan fees and charges, particularly benefiting smaller countries that require substantial assistance.
World Bank Group President Ajay Banga emphasized the importance of these new measures, stating, “These new financial measures will boost our lending capacity and enable us to drive meaningful change in the lives of people. Our Equity-to-Loans change is the latest step of sustained effort, and whenever we are able to responsibly secure additional optimization to IBRD’s balance sheet – we will.”
The reduction in the Equity-to-Loans ratio was made possible by enhanced protections that maintain IBRD's triple-A rating. These safeguards include a reinforced credit rating monitoring system with contingency plans such as cost-cutting, adjusting lending volumes, raising loan prices, suspending income transfers, and potentially seeking further shareholder support during stress events.
To better assist countries and reduce costs, several changes have been introduced in financing terms. These include a grace period for commitment fees on undisbursed balances, removal of pre-payment premiums to broaden repayment options for clients, discounted pricing for short maturity loans with a final maturity of seven years, and extending IBRD’s lowest pricing to vulnerable small states.
A notable addition is Enhanced Callable Capital—a first among development banks—allowing stakeholders' capital to be utilized like equity if needed under pressure on the bank’s rating. Shareholders now have the option to participate in this instrument.
The World Bank Group has been working on reforms recommended by the G20 Expert Group as part of its Capital Adequacy Framework review. This includes innovative financial instruments like a shareholder hybrid capital product and a Portfolio Guarantee Platform which expands lending by $70 billion over ten years due to contributions from 12 donors. Additionally, increased limits for shareholder bilateral guarantees could add up to $10 billion more.