IDB, World Bank reports on emergency capital could pave way for expanded lending

13/4/2024 14:51

        The Inter-American Development Bank and World Bank on Friday issued separate reports on callable capital, the emergency capital pledged by governments but not paid in, that could help multilateral development banks expand their lending capacity.
        
        The reports followed months of technical studies and reverse stress tests that showed shareholders viewed their commitments to provide the emergency capital as legally binding, but saw a remote chance it would ever be needed.
        
        The IDB bank said it conducted reverse stress tests that showed all its shareholders considered obligations for callable capital legally binding, but a call on the emergency capital remained a "highly remote scenario." The World Bank said its analysis showed the likelihood of a call was "extremely remote."
        
        IDB said its senior management was confident that credit rating agencies would find the analysis useful in assessing the value of callable capital. The study is part of a major push by the IDB and other multilateral banks to expand the resources available to help poor countries fight climate change.
        
        The World Bank said its review of the procedures and governance of callable capital had provided more clarity and transparency about shareholders' commitments, and could pave the way for changes to allow more lending.