World Bank Fund For World’s Poorest Nations to Issue First Bonds

LAGOS, Capital Markets in Africa: The World Bank’s fund for the poorest countries is preparing to tap financial markets for the first time.

The International Development Association plans to issue bonds to finance its loans and grants to countries such as Malawi and Niger. Created in 1960, IDA provides loans that charge no interest or very low rates primarily to countries that have an annual per capita income below $1,215. It also gives grants to nations that can’t manage their debt burdens.

“There’s a huge opportunity to really try to do more and think differently about development finance,” World Bank Vice President for Development Finance Axel van Trotsenburg said in an interview on Thursday.

Until now, IDA has been largely financed through contributions from about 50 countries, with the Group of Seven accounting for roughly two-thirds. The World Bank’s other lending arms, which typically offer loans at market rates, also support IDA’s budget.

More capital is needed to meet the world’s commitments to combat climate change and reduce poverty, van Trotsenburg said. Last year, the United Nations adopted a new set of sustainable development goals, including to “end poverty in all its forms everywhere.”

More Money
“The international community wants a lot more, yet the means aren’t necessarily immediately identified,” he said.

The World Bank is negotiating with donor countries to replenish IDA’s capital once the current contribution agreements expire next year. The bank is hoping donors will increase contributions by 50 percent, van Trotsenburg said.

S&P Global Ratings and Moody’s both assigned AAA ratings to IDA this week. It will likely do its first bond sale or private placement next year at the earliest, once the negotiations are completed, he said.

IDA made $16.2 billion in financial commitments in the year through the end of June, down from $18.9 billion the year before.

Source: Bloomberg Business News