By Nick Mann | 19 March 2012
The World Bank is to lend India $4.3bn over the next three years to help finance infrastructure and development projects under a special arrangement that will allow it to increase funding to the country beyond current limits.
Under the ‘innovative and flexible’ arrangement announced last week, the Bank will issue special bonds, known as Special Private Placement Bonds, which will be bought by the Indian government.
India is currently only able to borrow $17.5bn from the World Bank’s lending arm, the International Bank for Reconstruction and Development, but buying these bonds to offset future lending will increase the limit by $4.3bn.
Without the special bond issue, World Bank lending to India would have declined from around $4bn a year to around $1bn a year, the Bank said, affecting the country’s ability to continue ‘critical’ projects.
Vice president for South Asia Isabel Guerrero said: ‘Without taking this action, it would have been difficult for the Bank to assist India meaningfully as it tackles the remaining large challenges of lifting some 300 million out of poverty.
‘This new arrangement will work towards supporting India’s development needs, showing the Bank can be innovative, flexible and responsive to the differentiated needs of our client countries.’
In India’s case, the money will help to remove ‘bottlenecks’ in infrastructure and human skill development which, the Bank said, could constrain its ability to sustain non-inflationary, rapid and inclusive economic growth.
There are currently 80 active World Bank projects in India, including several large projects in the ‘critical’ area of infrastructure. They range from supporting efforts to eliminate leprosy to helping to finance improvements in Mumbai’s rail and road infrastructure.
