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PRESS RELEASE January 4, 1984

World Bank Lowers Interest Rate Again

The interest rate on loans to developing countries has been reduced from 10.47% to 10.08%, the International Bank for Reconstruction and Development (IBRD) announced today.

This is the third consecutive semi-annual rate reduction since July 1, 1982, when the IBRD adopted a policy of variable rates for new loans. On that date, the interest rate was 11.43%; it was reduced to 10.97% on January 1, 1983, and to 10.47% on July 1, 1983. The new rate of 10.08% will be in effect for six months, starting January 1, 1984.

The interest rate reduction was made possible by a further decline in the IBRD's borrowing costs. The IBRD borrows in the world's capital markets the funds needed for its lending operations. During the first six months of its 1984 Fiscal Year, starting on July 1, 1983, the Bank borrowed the equivalent of $5.0 billion consisting of $4.5 billion in medium- and long-term borrowings plus an increase of $500 million in outstanding short-term notes.

Medium- and long-term borrowings in the first half of FY84 consisted, before swaps, of $1,031 million in United States dollars, $846 million equivalent in Swiss francs, $797 million equivalent in Deutsche mark, $795 million equivalent in Japanese yen, $388 million equivalent in Dutch guilders, and a remaining $680 million equivalent in Pounds sterling, Canadian dollars, European Currency Units (ECUs), Libyan dinars, and Belgian francs. The cost of these borrowings was 9.15%. Substantial portions of US dollar and Canadian dollar borrowings and some borrowings in Pounds sterling and ECUs were swapped into Swiss francs, Deutsche mark, Dutch guilders and Austrian schilling. As a result, the net cost (after swaps} of new medium- and long-term borrowings in the first half of FY84 was 7.96%, compared to 9.15% (also after swaps) for $4.7 billion equivalent of such borrowings in the first half in FY83. The average cost of all short-term borrowings during the first half of FY84 was 9.23%.

The overall decline in borrowing costs is reflected in the new lower lending rate. The lending rate is calculated on the basis of the average cost during the last six months of a "pool" of outstanding Bank borrowings made between July 1, 1981, and December 31, 1983, to which a spread of 0.50% is added.

 


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