WB looks to change internal lending guidelines to free up US $ 4bn in lending capacity a year

The World Bank (WB) announced on Thursday that it may change its internal lending guidelines to free up US $ 4 billion in lending capacity each year, as it is under pressure to step up efforts to assist the developing countries to cope with climate change.

Speaking to Reuters, WB President David Malpass shared that the bank’s International Bank for Reconstruction and Development (IBRD) arm may lower its equity-to-lending ratio by one percentage point to 19 percent. While by doing so the WB would be taking on a bit more risk, the move is in line with an independent report prepared for the Group of 20 (G20) major economies 
last year. 

The board was expected to decide on the issue by the April meetings of the WB and International Monetary Fund, he said, as reported by Reuters.

In December, the IBRD raised its sustainable annual lending limit by US $ 2 billion, beginning in fiscal 2024 and Malpass said there could be scope for a further 8 percent expansion in total IBRD lending. The IBRD’s lending ceiling for fiscal 2022 was US $ 37.5 billion.

The developing countries need to secure US $ 1 trillion in external financing for climate action by 2030 and match that with their own funds, to cut emissions, boost resilience, deal with damage from climate change and restore nature and land, a WB report revealed.

Lowering the equity-to-lending ratio would free up more resources at a time of mounting global challenges such as the Ukraine war.