World Bank explores expanding loan guarantees for private financing
THE World Bank on Monday (Oct 9) said that it is looking at ways to expand the guarantees it provides for commercial loans to boost the private financing available to developing countries.
Some emerging economies have been unable to tap international markets as global interest rates soar and with uncertainty about when the US Federal Reserve will reach the end of its current tightening cycle.
A recent selloff in US Treasuries pushed yields on 10-year notes to a 16-year high, in turn lifting borrowing costs for developing economies.
“We are looking very systematically at how we can expand our work with the private sector. And that includes many forms of guarantees,” World Bank senior managing director Axel van Trotsenburg said on the sidelines of the World Bank and International Monetary Fund annual meetings in Marrakesh.
One of the biggest challenges, van Trotsenburg noted, is how to provide more funding for climate-change initiatives.
“The financing falls short and governments do not have the firepower to (provide more funding). So we need to complement the private sector intelligently,” he added.
Van Trotsenburg did not provide any figures nor a timeframe. World Bank guarantees have mobilised more than US$42 billion in commercial capital and private investment, spanning energy projects to sovereign financing in the last two decades, according to its website.
The multilateral lender has already provided partial guarantees for sovereign bonds through its International Development Association, including for a US$1 billion eurobond issue by Ghana in 2015.
US Treasury Secretary Janet Yellen in April said the bank must take steps to allow its private-sector and poor-country lending arms to lend to sub-sovereign entities such as cities and regional authorities.
The bank is currently pressing for more grants and new capital from member countries, even as it leverages its balance sheet to scale up lending for responses to climate change and other global crises. REUTERS
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