Contacts:
In Washington: Alexander Ferguson (202) 458 4953
aferguson@worldbank.org; WASHINGTON, March 4, 2008 – The World Bank Group today announced a new loan facility for natural catastrophes, improved the terms of an existing contingency financing product and approved a U.S. $300 million loan for Colombia under a new policy that significantly extends maturities. The announcements are part of a drive by President Robert B. Zoellick to improve the World Bank Group’s efforts to overcome poverty in middle-income countries. They follow a major reduction in loan pricing announced in September as well as measures that have accelerated loan processing times. “These financial product enhancements reflect the World Bank Group’s commitment to using creative ways to expand resources for our country partners,” Mr. Zoellick said. “As our client relationships with middle-income countries become more sophisticated, the World Bank is responding with development solutions that share knowledge, build markets and institutions, and provide capital.” The Catastrophe Risk Deferred Drawdown Option (DDO) facility, or CAT DDO, offers middle-income countries up to U.S. $500 million if they suffer a natural catastrophe such as a hurricane or earthquake. Its purpose is to provide bridge financing while other sources of funding are being mobilized. Funds will be disbursed when a country suffers a natural disaster and declares a state of emergency. Countries signing up for the facility must have a hazard risk management program in place that is monitored by the World Bank. The Board of Executive Directors also approved improvements to the existing Deferred Drawdown Option (DDO), launched in 2001 for countries that have no immediate need of funding but which may be forced to borrow because of unforeseen events. The improvements provide borrowers with greater certainty that the funds will be available when needed, extend the maturity and align the fee structure with the recent loan pricing reform, thereby eliminating a commitment fee and surcharge for extended maturities. The Board approved a $300 million loan to support a loan program in Colombia for its poorest students with an average repayment maturity of around 17 years. The loan is the first under a new policy that extends average repayment maturities to 18 years from a previous 10 years and three months to 14 years and three months, depending on per capita income. Maximum maturities on IBRD loans are extended to 30 from 25 years. The longer maturities help Colombia match the terms of the student loans with its borrowings from the Bank. In addition, the Bank is disbursing the U.S. dollar loan in Colombian pesos to protect Colombia from currency risk. The Bank is managing this risk through hedging. ### For information on The Catastrophe Risk Deferred Drawdown Option (DDO), or CAT DDO, please see the Background Note For information on financial products, please visit this website |
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