World Bank Announces Reduced Loan Costs for Middle-Income Countries

On September 27, 2007, the World Bank’s Board of Executive Directors approved the biggest reduction and simplification in loan and guarantee pricing in nine years for the 79 creditworthy countries that are clients and shareholders of IBRD.   In summary, interest rates have been reduced, all fees except for a small front-end fee of 0.25 percent have been abolished, and borrowing costs are now easier to understand.

The price on IBRD main loan products has been substantially reduced.  The current pricing for new Fixed-Spread Loans (FSLs) in USD is approximately LIBOR +9 basis points and for Variable-Spread Loans (VSLs) about LIBOR flat. Compared to the old pricing, on average the all-in cost savings for investment loans is approximately 32 basis points.

This means that, for example, that every US$ 10 million of new lending would cost US$ 32,000 less in debt servicing annually.

“The World Bank has long been among the most attractive sources of long-term financing for Belarus.  I am delighted that with these changes our financing charges will be even more attractive, thus helping us to do even more in financing long-term development needs.  These rates will apply to all new IBRD loans to Belarus” noted Paul Bermingham, World Bank Country Director for Belarus, Ukraine and Moldova.

The new policy is applicable for all new loans that have been signed on or after May 16, 2007.