World Bank to tap capital markets to raise funds for poorest countries

23 Sep 16

The arm of the World Bank responsible for lending to the world’s poorest countries plans to tap into the capital markets to raise funds after securing a AAA credit rating.

The International Development Association announced yesterday that it had been issued its first ever public credit rating from rating agencies Moody’s and Standard & Poors, and been awarded the highest calibre grade.

Arunma Oteh, the bank’s vice president and treasurer, said the rating positions will prompt the IDA to seek finance from the capital markets for the first time – pioneering a “new model for financing sustainable development in the poorest countries”.

Since the 1960s, the IDA has been financed solely by contributions from member countries. It will now leverage its balance sheet to pursue capital finance, which it said will support action across the development spectrum, but with a special focus on areas including climate change, conflict and governance.

At the same time, Axel van Trotsenburg, World Bank vice president for development finance, said the innovation will deliver “exceptional value for money” for donors.

“Every dollar they contribute [will translate] into about $3 in finance directly from IDA. This is one of the most concrete and significant proposals to date on the Addis Ababa Agenda to scale up the financing needed to achieve the Sustainable Development Goals.”

He added that the change represents one of the “most radical transformations in IDA history”. Other arms of the World Bank, however, such as the International Bank for Reconstruction and Development, which focuses on middle-income countries, already raise healthy sums on the capital markets.

In a statement on the rating, Moody’s said that the IDA’s high capital adequacy, liquidity and the strength of its member support were all factors in its decision. 

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