Middle-income countries face substantial development challenges. They must sustain growth that provides productive employment while reducing poverty and inequality. They must manage macroeconomic risks stemming from volatile capital flows, contingent liabilities, financial markets, and pensions. They must build crisis-management capability to deal with global pandemics, such as avian influenza. They must enhance their competitiveness, adopt clean energy, ensure environmental sustainability, and strengthen the institutional and governance structures that underpin viable market-based economies. The Bank is uniquely placed to help middle-income countries deal with all of these challenges through IBRD. The Role of IBRD IBRD is an AAA-rated financial institution—with some unusual characteristics. Its shareholders are sovereign governments, each of which has a voice in setting IBRD’s policies. Many of them are eligible to borrow from it. IBRD provides financing (loans, guarantees, and related risk-management tools); expertise in development-related technical disciplines; and assistance in gaining access to capital and financial risk-management tools in larger volumes, on better terms, at longer maturities, and in a more sustainable manner than countries could receive from other sources. Unlike commercial banks, IBRD is driven by development impact rather than profit maximization. IBRD Lending New lending commitments by IBRD fell in fiscal 2007, to $12.8 billion for 112 operations. Development policy lending represented 28 percent of total lending. Latin America and the Caribbean received the most IBRD lending, with $4.4 billion (34 percent of total IBRD commitments).It was followed by Europe and Central Asia, which received $3.3 billion (26 percent) in funding and East Asia and Pacific, which received $2.8 billion (22 percent). Lending was more concentrated than in fiscal 2006. Whereas in fiscal 2006, 52 percent of total lending went to the five largest borrowers, in fiscal 2007, combined commitments amounting to 56 percent of total lending went to the five largest borrowers—Argentina, China, India, Turkey, and Colombia. Transportation received the highest volume of IBRD lending ($3.6 billion); followed by Law and Justice and Public Administration ($2.7 billion); and Water, Sanitation, and Flood Protection ($1.9 billion). The thematic composition of lending was led by Financial and Private Sector Development ($2.6 billion), followed by Urban Development ($1.6 billion). Share of Total IBRD Lending by Region, Theme, and Sector IBRD Resources IBRD obtains most of its funds by selling bonds in international capital markets. In fiscal 2007, it raised $11 billion at medium- to long-term maturities. Debt securities, with a wide range of maturities and structures, were issued in 11 currencies. IBRD is able to borrow high volumes on very favorable terms. IBRD’s financial strength is based on its prudent financial policies and practices, which help maintain its high credit rating. As a cooperative institution, IBRD seeks not to maximize profit but to earn enough income to ensure its financial strength and to sustain its development activities. IBRD maintained adequate liquidity in fiscal 2007 to ensure its ability to meet its obligations. As of June 30, 2007, it held about $22.2 billion in liquid assets. Also as of June 30, 2007, IBRD’s outstanding borrowings from capital markets were about $81.1 billion (net of swaps). Borrowings exceeded equity by a factor of about three. Total disbursed and outstanding loans were $97.8 billion. Consistent with IBRD’s development mandate, the principal risk it takes is the country credit risk inherent in its portfolio of loans and guarantees. Risks related to interest and exchange rates are minimized. One summary measure of the Bank’s risk profile is the ratio of balance sheet equity to outstanding net loans, which is closely managed in line with the Bank’s financial and risk outlook. This ratio, excluding the reserve allocation from allocable net income in fiscal 2007, stood at 35 percent as of June 30, 2007. IBRD’s Borrowings and Investments IBRD Equity-to-Loans Ratio © 2007 The International Bank for Reconstruction and Development/The World Bank |
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