The International Bank for Reconstruction and Development (IBRD) has officially announced its new pricing structure for IBRD loans that became effective on July 1, 2018.
In Q1, the World Bank Group’s shareholders endorsed an ambitious package of measures including $7.5 billion paid-in capital and $52.6 billion callable capital increase for IBRD.
The capital package included loan pricing measures to increase income, boost reserves and strengthen IBRD’s capital position. Specifically, shareholders agreed to increase the maturity premium for loans with an average repayment maturity longer than 10 years.
The maturity premium increase will depend on the income level and other circumstances of the different country groups, while providing flexibility for all borrowers to access the full range of maturities.
IBRD pricing categories
IBRD countries will be classified into one of four pricing groups:
- Group A: Blends, small states, countries in fragile and conflict-affected situations (FCS) and recent IDA graduates. These countries are exempt from the maturity premium increase regardless of their income levels.
- Group B: Countries below-GDI, which do not qualify for an exemption listed in Group A.
- Group C: Countries above-GDI, but below HIC status (high-income countries), and which do not qualify for an exemption listed in Group A.
- Group D: Countries with high income status (HIC) and which do not qualify for an exemption listed in Group A.
Graduation Discussion Income (GDI) is the level of GNI per capita of a member country above which graduation from IBRD starts being discussed, as published annually in the World Bank’s Per Capita Income Guidelines for Operational Purposes.
The current maturity premium and the new maturity premiums (in basis points) for the four pricing groups are set forth in the table below.
Pricing terms for each borrower will be updated annually at the beginning of the World Bank’s fiscal year (July 1), in accordance with the country’s classification in the “Per Capita Income Guidelines for Operational Purposes”, along with any applicable discount, surcharge or exemption.
When a country moves to a lower income category or qualifies for an exception listed in Group A on July 1, the lower pricing will be applicable from July 1 of the calendar year of the reclassification. Read more: Côte d’Ivoire: Robust economic growth under looming threat of climate change impacts
If a country moves to a higher income category the higher charges will be applicable as of July 1 of the following year. For additional details please refer to the Bank Policy – Financial Terms and Conditions of Bank Financing.
Effectiveness and grandfathering
The new pricing measures became effective on July 1, 2018. To avoid disruptions, loans will not be subject to the maturity premium increase if both of the following conditions are met:
(1) the invitation to negotiate was issued on or before June 30, 2018;
(2) the loan is approved by World Bank Board of executive directors on or before September 30, 2018.
IBRD guarantees will be grandfathered if the guarantee is approved by EDs on or before September 30, 2018.