The World Bank announced on Monday that it is exploring methods to increase the commercial loan guarantees it offers in order to increase the amount of private finance available to developing nations.
Due to rising global interest rates and the uncertainty surrounding when the U.S. Federal Reserve will reach the conclusion of its current tightening cycle, certain emerging economies have been unable to access international markets.
The cost of borrowing increased for developing economies as a result of a recent sell-off in US Treasury securities, which increased 10-year note rates to a 16-year high.
“We are methodically considering how to increase our collaboration with the private sector. Axel van Trotsenburg, senior managing director of the World Bank, spoke to reporters on the sidelines of the World Bank and International Monetary Fund annual meetings in Marrakech. “And that includes many forms of guarantees,” he added.
How to increase finance for climate change efforts is one of the major issues, according to Van Trotsenburg.
“The finances are inadequate, and governments lack the force to address this. Therefore, we must thoughtfully complement the private sector, he continued.
Van Trotsenburg didn’t give any numbers or a deadline. According to its website, over the past 20 years, World Bank guarantees have helped to raise more than $42 billion in commercial finance and private investment for everything from energy projects to sovereign funding.
Through its International Development Association (IDA), the multilateral lender has already offered partial guarantees for state bonds, including for Ghana’s $1 billion Eurobond offering in 2015.
In April, U.S. Treasury Secretary Janet Yellen said the bank must take action to allow its lending arms to the private sector and developing nations to lend to sub-sovereign entities like cities and regional authorities.
Even as it uses its balance sheet to expand financing for solutions to climate change and other global challenges, the bank is currently urging member nations to provide additional grants and fresh capital.
