As development aid from the United States and Europe continues to decline, policy experts and advocacy groups are urging the World Bank to further lower the equity-to-loan ratio of its primary lending arm in order to unlock billions of dollars in funding for vulnerable countries.
Eric Pelofsky, vice president of the Rockefeller Foundation, said that reducing the International Bank for Reconstruction and Development’s (IBRD) equity-to-lending ratio from 18% to 17% could generate an additional $30 billion to $40 billion in lending capacity. He stressed that the move would not require new financial commitments from shareholders or taxpayers, nor would it compromise the bank’s capital reserves.
“These funds could help governments plug budget gaps and bolster essential services like healthcare, water, and sanitation, which are already under strain due to shrinking aid,” Pelofsky said. He also proposed that the World Bank offer short-term, low-interest loans to non-governmental organizations facing funding crises to support their transition toward long-term sustainability.
The World Bank has already reduced the IBRD’s equity-to-loan ratio by one percentage point in both 2023 and 2024, in line with recommendations from a G20-commissioned independent review aimed at reforming the institution’s global development response.
Pressure to act has intensified since U.S. President Donald Trump’s return to office in January. His administration has enacted steep cuts to foreign assistance under his renewed “America First” agenda, while several European nations have followed suit with their own reductions.
Pelofsky warned that continued inaction could have life-threatening consequences. “Inaction will have concrete consequences,” he said, citing research that links reduced U.S. aid to heightened risks for millions of lives globally.
Support for the proposal has also come from the Jubilee USA Network, a faith-based advocacy group. Its executive director, Eric LeCompte, who advises the United Nations, called for urgent action.
“With significant cuts in U.S. and European development aid, the World Bank must move quickly to fill the gap,” LeCompte said. “This decision could make a critical difference.”
Nzubechukwu Eze.
