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Eleven developed countries commit $11 billion to World Bank to address global challenges including climate change

These pledges come as part of the World Bank Group's efforts to implement reforms and introduce innovative financial mechanisms recommended by the G20 Expert Group
06:01 PM Apr 20, 2024 IST | SURINDER SINGH OBEROI
eleven developed countries commit  11 billion to world bank to address global challenges including climate change
Eleven developed countries commit $11 billion to World Bank to address global challenges including climate change --- Representational Photo
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New Delhi, Apr 20: To tackle pressing international issues, and to bolster global development initiatives, eleven developed countries have pledged a substantial $11 billion towards innovative financial instruments.

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This funding, announced yesterday, is earmarked for the Portfolio Guarantee Platform, hybrid capital mechanism, and the new Liveable Planet Fund. The Liveable Planet Fund is a newly established initiative aimed at addressing environmental challenges and promoting sustainable development practices on a global scale.

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The Portfolio Guarantee Platform and hybrid capital mechanism, endorsed by Belgium, France, Japan, and the United States, aim to enhance lending capacity and absorb more risk within the World Bank Group. Meanwhile, Denmark, Germany, Italy, Latvia, the Netherlands, Norway, and the United Kingdom have committed to supporting the hybrid capital mechanism.

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The Portfolio Guarantee Platform represents an innovative tool for leveraging financial resources, mobilizing private sector investment, and accelerating progress towards achieving the World Bank Group's development objectives. By reducing barriers to access to finance and encouraging investment in priority sectors, it plays a crucial role in advancing sustainable development and fostering economic growth in developing countries.

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By leveraging the hybrid capital mechanism, the World Bank Group can expand its capacity to mobilize resources, attract investment from a broader range of investors, and accelerate progress towards achieving its development objectives. Overall, this financial tool plays a vital role in advancing sustainable development and fostering economic growth in developing countries by unlocking additional funding for critical projects and initiatives.

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Japan, displaying a commitment to environmental sustainability, has pledged to kickstart the Liveable Planet Fund with its initial contribution.

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Ajay Banga, President of the World Bank Group, expressed gratitude for the countries' generosity, highlighting the potential impact of these financial instruments.

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"We worked hard to develop these new financial instruments that boost our lending capacity, multiply donor funds, and ultimately allow us to improve the lives of more people," said Banga. "The generosity of these countries is both an endorsement of the progress we have made to reform the Bank, and a sign of their shared commitment to development globally."

The leveraging capability of the World Bank Group is expected to multiply the pledged resources six to eight times over the next decade, potentially reaching a leverage amount of tenfold under certain conditions. This means that the $11 billion commitment could translate into up to $70 billion in funds available for urgent global needs and development projects.

These pledges come as part of the World Bank Group's efforts to implement reforms and introduce innovative financial mechanisms recommended by the G20 Expert Group.  These reforms include adjustments to loan-to-equity ratios, increases in bilateral guarantee limits, and the introduction of hybrid capital and the Portfolio Guarantee Platform.

Furthermore, the introduction of the Liveable Planet Fund signals a proactive approach to incentivize cooperation across borders and address shared environmental challenges.

The World Bank Group has also announced the development of IBRD 50-year loans at no additional cost for borrowers, focusing on projects with cross-border benefits. Additionally, interest rates for projects addressing global challenges will be reduced, with partial funding coming from the Livable Planet Fund.

With these commitments and reforms, the World Bank Group aims to amplify its impact on global development while mitigating risks and enhancing cooperation among nations to address pressing global challenges.

In conclusion, the significant pledges made by eleven developed countries towards innovative financial mechanisms signal a promising step forward in addressing global challenges. The commitment of $11 billion underscores a collective recognition of the urgency and scale of issues such as poverty, climate change, and economic inequality.

While these commitments represent a commendable step forward, challenges remain. The effective implementation of these financial mechanisms, ensuring transparency, accountability, and equitable distribution of resources, will be crucial.

Additionally, ongoing collaboration among donor countries, international organizations, and recipient nations will be essential to maximize the impact of these investments and address complex global challenges comprehensively.

The pledges made by these eleven developed countries mark a significant milestone in the global development agenda. With concerted efforts and strategic investments, there is potential to drive meaningful progress towards a more equitable, resilient, and sustainable future for all.

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