Singapore and New Zealand announced they will contribute to two innovative World Bank financial instruments designed to expand the institution’s lending capacity to address global challenges, according to the announcement. Singapore pledged $20 million to the Bank’s hybrid capital instrument and plans to become the first shareholder to redirect interest payments from this instrument to the Bank’s net income, creating up to $200 million in additional lending capacity over 10 years when leveraged.
Singapore joins 11 other countries that have collectively pledged around $1.2 billion to hybrid capital, an instrument that gives shareholders and partners an opportunity to invest with special leveraging potential. When leveraged, this total amount can expand the Bank’s lending capacity by around $9 billion over 10 years. Germany, Latvia, the Netherlands, Denmark, Sweden, Iceland, Canada, the United Kingdom, Norway, Italy, and Australia are also contributing to hybrid capital.
New Zealand became the first shareholder to subscribe to Enhanced Callable Capital (ECC), pledging $50 million to an instrument that functions like equity and can be activated to safeguard the International Bank for Reconstruction and Development’s credit rating in the rare event of imminent threat. Each dollar of ECC unlocks $6 in lending capacity over 10 years, amplifying development impact, with the World Bank Group becoming the first multilateral development bank to use its callable capital in this way.
World Bank Group President Ajay Banga said Singapore and New Zealand are leading the way by contributing to innovative financial tools with strong leveraging potential, allowing the institution to invest more in projects that create jobs and help people reach their full potential. Singapore’s Minister in the Prime Minister’s Office Indranee Rajah said the contribution would enable the Bank to leverage eight to ten times the amount to address global challenges such as energy access, water security, and sustainable growth, while New Zealand’s Finance Minister Nicola Willis emphasized the Bank’s expertise and strong relations in the Pacific.
The World Bank has expanded its lending capacity by around $100 billion over the next 10 years through the introduction of new financial instruments and balance sheet optimization measures, including lowering the minimum equity-to-loans ratio, which could add $70 billion in new lending over a decade. These innovations enable investments that are expected to transform hundreds of millions of lives across developing countries.
