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The World Bank has unveiled new measures to boost its lending to the world’s poorest countries as it pivots towards tackling climate change and pandemics alongside its traditional mandate to alleviate poverty.
The lender said it would launch a new $5bn guarantee programme allowing shareholder countries to pledge to repay loans for countries in the event of a default. Officials estimated the measure would increase available funds by $30bn over the next decade by allowing the lender to issue more loans to developing countries while maintaining a AAA credit rating.
In a factsheet outlining the new initiatives, the Bank said it was working to “drive impactful development and take more risk — helping create a world that is inclusive of everyone, including women and young people, resilient to shocks, and sustainable.”
It said it was working with shareholders and rating agencies to allow it to expand lending against its callable capital — money governments have pledged to give to the bank if it is in financial distress.
Ajay Banga, the new World Bank president nominated by US president Joe Biden, will say at a speech at the G20 on Tuesday that officials are working to “stretch every dollar” while preserving the Bank’s AAA credit rating, according to prepared remarks.
“We cannot endure another period of emission-intensive growth,” Banga will say. “We must find a way to finance a different world, one where climate [is] resilient, pandemics are manageable, food is abundant, and poverty is defeated.”
The World Bank has for decades maintained that holding an AAA credit rating from all three main rating agencies was essential for it to access low-cost funding from bond markets. But a G20-commissioned report, released last summer, found multilateral development banks, including the World Bank, could potentially take on more financial risk while maintaining their top-tier ratings.
Banga will say the Bank was “responding” to calls for reform. “A new vision is required that is worthy of our shared aspirations. In my view, the vision for the World Bank is simple: To create a world free of poverty — on a liveable planet.”
On Tuesday, the Bank said it had begun fundraising for a new crisis facility to offer concessional funds — either grants or extremely low-interest loans — to the world’s lowest income countries, with a fundraising target of $6bn.
Last month, the World Bank said it would allow countries hit by disasters to pause repayments on loans and allow countries to “quickly redirect” a portion of their funds to responding to a crisis.
The World Bank has come under fire for failing to adequately address the scale of the global climate crisis while maintaining its mission to reduce poverty.
In February, former World Bank president David Malpass resigned from his post almost a year early after facing intense pressure over his refusal at a conference to say whether he believed humans caused climate change. He later said his comments had been misinterpreted.
