MARRAKESH (Reuters) – The World Bank said on Monday it was considering ways to expand the guarantees it provides on commercial loans to make more private loans available to developing countries.
Amid soaring global interest rates and uncertainty about when the U.S. Federal Reserve’s current tightening cycle will end, some emerging economies are unable to tap into international markets.
The recent drop in U.S. Treasuries has pushed the 10-year Treasury yield to a 16-year high, raising borrowing costs for developing countries.
“We are very systematic about how we can expand our cooperation with the private sector,” World Bank Managing Director Axel van Trotzenburg told Reuters on the sidelines of the World Bank and International Monetary Fund’s annual meetings. “We’re looking at it in a number of ways, including many forms of guarantees.” In Marrakech.
Van Trotsenburg said one of the biggest challenges is how to provide more funding to tackle climate change.
“Funding is scarce and the government doesn’t have the firepower to do it, so we need to complement it wisely with the private sector,” he added.
Van Trotsenburg declined to give figures or time frames. According to the World Bank website, World Bank guarantees have mobilized more than $42 billion in commercial capital and private investment in sovereign financing for energy projects over the past two decades.
Multilateral financial institutions already provide partial guarantees on sovereign debt through the International Development Association (IDA), including the $1 billion Eurobond issued by Ghana in 2015.
Treasury Secretary Janet Yellen said in April that banks must take steps to ensure that the private sector and poor countries’ lending arsenals lend to quasi-sovereign institutions such as cities and municipalities.
The bank is now seeking more subsidies and new capital from member countries, while using its balance sheet to expand lending to address climate change and other global crises.
Report by Jorgelina do Rosario.Editing: Kirsten Donovan
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