- World Bank has removed several loan fees for poor countries
- The move aims to make borrowing more affordable for such countries
- The World Bank said the loan fee removal will increase its lending capacity over the next decade
The World Bank has announced the removal of several loan fees, especially on International Bank for Reconstruction and Development (IBRD) loans, to make borrowing more affordable for poor countries.
This was contained in a link posted on the World Bank’s official X Handle on Tuesday, which showed that the bank had eliminated the prepayment premium on IBRD loans, introduced a grace period for commitment fees on balances yet to be disbursed, and extended its lowest pricing to small, vulnerable states.
It said the removal of loan fees aims to ease financial pressure on poor countries that are mostly in need of development financing.
The bank said, “The bank is working hard to make it easier for countries to borrow and to pay back their loans more easily by removing some fees on IBRD loans.
“These measures are designed to make borrowing easier and more affordable for countries facing significant challenges.”
Loan fee removal to increase World Bank’s lending capacity
The World Bank noted that the removal of loan fees is part of its broader financial reforms, which aim to increase lending capacity by $150 billion over the next decade.
It said this would be achieved through innovative financial instruments, leveraging shareholder support, and optimising available capital while retaining the integrity of its Triple-A credit rating.
The bank added that the reforms also include adjustments to the IBRD’s equity-to-loans ratio, which was reduced from 20 per cent to 18 per cent, enabling additional lending of approximately $70 billion over 10 years.
It stated that an additional $10 billion had been unlocked through bilateral guarantees, and $1 billion was secured through a guarantee from the Asian Infrastructure Investment Bank.
The World Bank noted that the changes are crucial to addressing the trillions of dollars needed annually to combat climate change, support fragile states, and promote digital inclusion.
“The adjustments to our capital framework reflect our commitment to scaling up resources while maintaining financial stability,” the bank said.
Need for collaborative investments
The World Bank also noted that the financial demands cannot be met by governments and multilateral institutions and called for collaboration and private sector investments.
This necessitated the bank’s introduction of the Framework for Financial Incentives (FFI) in April 2024, which encourages investments in cross-border challenges such as biodiversity, water security, energy access, and pandemic prevention.
It stated, “The FFI is the first comprehensive framework among multilateral development banks to incentivise financing for projects with global benefits.”
World Bank urges Nigeria to sustain economic reforms for 10 to 15 years
Meanwhile, TheRadar reported that the World Bank said Nigeria needs to sustain its ongoing reforms for the next 10 to 15 years to achieve economic transformation.
This was disclosed by Indermit Gill, Senior Vice-President of the World Bank Group, on Monday, October 14, at Abuna during the 30th Nigerian Economic Summit (NES), organised by the NES Group (NESG) in collaboration with the Ministry of Budget and National Planning.
