The World Bank, which is under pressure to do more to help poor countries with climate change, is considering taking more risks to unlock $4 billion in additional lending capacity annually, the World Bank president told Reuters on Thursday. David Malpass.
Malpass said the bank’s International Bank for Reconstruction and Development (IBRD) could cut its capital-to-loan ratio by one percentage point to 19%.
Lowering the capital-loan ratio would free up more resources at a time of growing global challenges like the war in Ukraine, he said. The board of directors is expected to make a decision on the matter before the bank and International Monetary Fund meetings in April.
IBRD decided in December to increase its sustainable annual lending limit by $2 billion starting in fiscal 2024, and Malpass said further expansion is possible. The credit ceiling for fiscal year 2022 was $37.5 billion.
Malpass announced his resignation from the bank on Wednesday amid mounting pressure from the US Treasury Department to speed up reform. He told Reuters on Thursday in his first interview since he announced his departure that the bank is well along in its “evolutionary path”.
The bank’s management has already discussed the 19% proposal with ratings agencies, which was the most likely outcome of the discussions now taking place, a source familiar with the matter said.
The World Bank has long resisted a change to its capital adequacy rules, fearing it would undermine its AAA rating, but two of the top three agencies said last year that certain changes could be made without affecting ratings. .
The bank’s board met on Thursday to discuss the proposal and other options, a second source said. “We recognize that the rating can be downgraded in a financially sustainable manner,” the source said.
The United States, the bank’s largest shareholder, had no immediate comment on the proposed index change, but for months has been urging the bank to take bolder and faster steps to release urgently needed funds.
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