In a significant move to address pressing global issues, the World Bank said countries have committed to contributing more than $11 billion to new hybrid capital and portfolio guarantee instruments.
Under the model, the portfolio guarantee instruments are designed to expand the bank’s financing capacity by $70 billion over a decade, focusing on tackling climate change, pandemics and other global challenges.
The voluntary contributions, announced at World Bank and International Monetary Fund spring meetings in Washington, mark the most significant enhancement to the World Bank’s balance sheet since the U.S. and other shareholders expanded its mission beyond fighting poverty in 2022.
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Notably, the United States led the pledge with around $9 billion allocated to the new portfolio guarantee platform, which backs private loans and equity investments in qualifying projects.
Japan said it is contributing $1 billion to the guarantee program, France is expected to contribute $500 million, and Belgium will contribute an undisclosed amount.
Additionally, Japan is spearheading the creation of the “Livable Planet Fund,” aiming to capture contributions from governments, philanthropies, and the private sector to help finance projects ranging from energy transition investments to healthcare delivery.
German Development Minister Svenja Schulze emphasized the continued need to expand the World Bank’s lending capacity to meet the growing needs of poor countries, indicating that further reforms are on the horizon.
Contributing to the mechanism for hybrid capital – an instrument that includes features of both debt and equity to leverage loans – are Britain, Denmark, Germany, Italy, Latvia, the Netherlands, and Norway. Britain said it is contributing 100 million pounds.
Anshula Kant, the World Bank’s chief financial officer, said the facilities will finance only projects with cross-border benefits, such as those that reduce greenhouse gas emissions or help prevent pandemics.
World Bank President Ajay Banga, who took office nearly a year ago, is working on several other initiatives to expand the World Bank’s balance sheet. One is harnessing callable capital—emergency funds pledged by shareholding governments but not paid in—that could unlock hundreds of billions of dollars in additional lending capacity.
