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How IBRD is Financed

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IBRD raises most of its funds on the world's financial markets. It has become one of the most established borrowers since issuing its first bond in 1947 to finance the reconstruction of Europe after World War Two. Investors see IBRD bonds as a safe and profitable place to put their money and their cash finances projects in middle-income countries.

IBRD became a major player on the international capital markets by developing modern debt products, opening new markets for debt issuance, and by building up a broad investor base around the world of pension funds, insurance companies, central banks, and individuals.

The World Bank's borrowing requirements are primarily determined by its lending activities for development projects. As World Bank lending has changed over time, so has its annual borrowing program. In 1998 for example, IBRD borrowing peaked at $28 billion with the Asian financial crisis. It is now projected to borrow between $10 to 15 billion a year.

IBRD borrows at attractive rates on the capital markets thanks to its triple-A status that it has had with credit rating agencies since 1959. This has enabled it to borrow in U.S. dollars, for example, at an overall funding cost that comes close to that of the U.S. Treasury. IBRD enjoys its high credit rating because it is backed by the capital commitments of its 186 shareholder governments. It is also the result of IBRD's strong balance sheet, prudent financial policies, and its expected treatment as a preferred creditor when a country has difficulty in repaying its loans. IBRD has also profited from anticipating shifts in investor preferences and investing in the risk management and systems to take advantage of those trends.

IBRD has to its credit a string of firsts in its borrowing program. These include the first currency swap in international markets in 1981, through to the introduction of the first global bond in 1989, to the first fully integrated electronic bond offering via the Internet in 2000. In 2003, the World Bank executed the first fully electronic swap auction. Innovations by IBRD have also supported its goal of promoting development. Although much of its borrowing is in U.S. dollars, IBRD has over the years offered bonds in more than 40 different currencies. Its issues in nascent capital markets have often been a catalyst for improving market infrastructure and efficiency.

IBRD's earns an income every year from the return on its equity and from the small margin it makes on lending. This pays for IBRD's operating expenses, goes into reserves to strengthen the balance sheet and also provides an annual transfer to the International Development Association (IDA). IBRD has raised the bulk of the money loaned by the World Bank to alleviate poverty around the world. This has been done at a relatively low cost to taxpayers, with governments paying in $11 billion in capital since 1946 to generate more than $400 billion in loans.




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