World Bank arm open to $8 billion infra loan cover
NEW DELHI : A World Bank agency is prepared to stand guarantor for up to $8 billion of loans taken by state-owned infrastructure builders and local government bodies, a move that could attract private capital in a whole range of public projects. In an interview, Junaid Kamal Ahmad, vice-president, operations at the bank’s Multilateral Investment Guarantee Agency (MIGA), said the agency’s focus on underwriting loans aligns with India’s infrastructure development strategy at the national and sub-national levels, covering sectors like logistics, transport, electricity and water.
As a start, the Dedicated Freight Corridor Corporation of India Ltd (DFCCIL) last week received MIGA’s guarantee for up to $132 million of loans from MUFG Bank of Japan for up to eight years. Ahmad, who was earlier country director for the World Bank in India, said MIGA may also stand guarantor for municipal bonds, allowing better ratings of these instruments and bringing global capital to the local bodies.
MIGA’s credit guarantee plan comes as a shot in the arm for state-owned infrastructure developers, as it opens a new window for them to secure overseas loans and diversify beyond direct lending by multilateral development banks (MDBs) such as the World Bank, Asian Development Bank, etc. “MIGA doesn’t require a counter-guarantee from the central government, which MDB loans require," said Ahmad.
The World Bank Group has two other lending arms. The International Development Association (IDA) lends to the world’s poorest countries, while International Bank for Reconstruction and Development (IBRD) lends to middle-income and creditworthy low-income countries.
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