(Reuters) – World Bank President Ajay Banga on Tuesday unveiled new plans to expand the bank’s balance sheet and help countries tackle climate change and other challenges, saying a capital increase would be necessary in the long term.
Ajay Banga, former CEO of Mastercard who took over as World Bank chief on June 2, announced new proposals to “make greater use of (the) balance sheet” during a meeting of G20 chief financial officers, which brings together 20 major world economies in Gandhinagar, India.
These new measures, which are still being discussed with shareholder countries, come on top of other proposals approved in April, which will increase the volumes that the World Bank can lend by $50 billion over the next ten years. .
The United States, the Bank’s main shareholder, kicked off these reforms in October, notably by appointing Ajay Banga to succeed David Malpass with the specific mission of accelerating the institution’s evolution.
This week, US Treasury Secretary Janet Yellen called for further reform of the World Bank and other multilateral development banks, saying capital increases would only be possible if these institutions put in place measures to increase their capacity. help countries tackle climate change and other issues.
“We are progressing rapidly,” said Anjay Banga.
“We are building a better bank, but eventually we will need a bigger bank.”
The proposals, if followed, could increase loan volumes by tens of billions of dollars, by allowing shareholder countries to guarantee loans if they cannot be repaid by borrowing countries, a measure which the World Bank says would generate six dollars of new loans for every dollar of collateral over a 10-year period, or $30 billion for every $5 billion.
In addition, the Bank could also issue a new hybrid capital instrument that would allow shareholders to invest in bonds, which would allow it to increase its loans to the tune of $6 billion.
The institution proposes to absorb more risk and increase lending by widening the conditions applicable to “callable” capital, that is to say, money pledged by governments but which does not is not currently on loan.
The World Bank also plans to expand lending at very low or zero interest rates, including through a new $6 billion crisis facility set up for the poorest countries through the ‘International Development Association.
(Report Andrea Shalal, Corentin Chapron)
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