Amidst sharp reductions in development aid from Europe and the United States, policy experts and advocacy groups are calling on the World Bank to further lower the equity-to-loan ratio of its main lending arm to unlock billions of dollars in additional funding for vulnerable nations.
Eric Pelofsky, vice president of the Rockefeller Foundation, said reducing the International Bank for Reconstruction and Development’s (IBRD) equity-to-lending ratio from 18% to 17% could free up an estimated $30 billion to $40 billion in extra lending capacity. He emphasised that such a move would not place any new financial burdens on taxpayers or shareholders, nor would it jeopardise the bank’s capital reserves.
Pelofsky argued that these additional funds could help governments address immediate or expected budget shortfalls and strengthen essential public services such as healthcare, water, and sanitation — sectors already strained by the cutbacks in foreign aid. He also suggested the World Bank extend short-term, low-interest loans to non-governmental organisations facing operational crises, helping them transition to more sustainable, long-term funding strategies.
The World Bank has already lowered its equity-to-loan ratio by one percentage point in 2023 and again last year, following recommendations by an independent commission under the Group of 20 major economies. These changes were part of a broader reform effort to increase the bank’s responsiveness to global development challenges.
Since President Donald Trump returned to the White House in January for a second term, his administration has slashed billions in foreign assistance as part of a policy shift to align aid with his “America First” agenda. Several European nations have also reduced their development spending.
Pelofsky warned that failure to act would have dire consequences. “Inaction will have concrete consequences,” he said, pointing to research showing that reductions in US foreign aid could endanger millions of lives.
The call for action has received strong support from Jubilee USA Network, a religious development advocacy group. Its executive director, Eric LeCompte, who also advises the United Nations, urged the World Bank to move swiftly. “The World Bank can and should make this decision as soon as possible,” he said. “With the significant cuts we’ve seen from the U.S. and Europe on development aid, this action by the World Bank can fill this aid gap.”
Faridah Abdulkadiri
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