Singapore and New Zealand have announced significant contributions to innovative World Bank financial instruments designed to expand the Bank’s lending capacity and address global development challenges. Singapore pledged $20 million to the Bank’s hybrid capital instrument and will redirect interest payments from this instrument to the Bank’s net income. Leveraged effectively, Singapore’s contribution could provide up to $200 million in additional lending capacity over the next ten years. This effort complements pledges from 11 other countries, collectively totaling around $1.2 billion, which could expand the Bank’s lending capacity by approximately $9 billion over the same period.
New Zealand became the first shareholder to subscribe to the Enhanced Callable Capital (ECC) instrument with a $50 million contribution. ECC functions similarly to equity and can be activated to protect the International Bank for Reconstruction and Development’s credit rating in rare situations. Each $1 of ECC can unlock $6 in lending capacity over ten years, significantly amplifying the Bank’s development impact. This innovative approach marks the first time a multilateral development bank has utilized callable capital in this manner.
World Bank Group President Ajay Banga highlighted that the contributions from Singapore and New Zealand strengthen the Bank’s ability to invest in projects that create jobs and empower communities worldwide. Singapore’s Minister Indranee Rajah emphasized that the hybrid capital instrument allows the Bank to leverage eight to ten times the contribution to address critical global issues such as energy access, water security, and sustainable growth. Similarly, New Zealand’s Minister of Finance Nicola Willis noted that the ECC enables the Bank to efficiently increase lending capacity while supporting development, particularly in the Pacific region.
Through these new financial instruments and balance sheet optimization measures, including lowering the minimum equity-to-loans ratio, the World Bank has expanded its lending capacity by approximately $100 billion over the next decade. This expansion will enable transformative investments, impacting hundreds of millions of lives across the globe and strengthening the Bank’s mission to end extreme poverty and promote shared prosperity.
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