The World Bank announced today its financial results for the six months ended December 31, 1988, the first half of its 1989 fiscal year.
Lending
New loan commitments totaled $3.6 billion, the same as in the first half of FY88. Disbursements on loans to developing countries were $6.1 billion, a 6 percent increase over the same period in FY88. Currently active borrowers repaid $3.3 billion of principal to the Bank, not including some $1 billion of voluntary prepayments chiefly by two-member countries. Commitments by the International Development Association (IDA), the Bank's concessional lending affiliate, totaled $1.0 billion equivalent or about $100 million less than in the first half of FY88, while IDA disbursements totaled almost $2.0 billion or 13 percent more than in the first half of FY88.
Net Income
The Bank's net income, before provisioning against possible loan losses, was $662 million in the first half of FY89 compared to $701 million in the first half of FY88. In June 1988, the Bank revised its provisioning policy by initiating provisioning when a country enters nonaccrual status, that is, becomes overdue by over six months on any loan service payment to the Bank, rather than waiting until the country is two years overdue. In the first half of FY88, after provisioning $22 million under the then-current policy, net income was $679 million. In the first half of FY89, after provisioning $176 million under the revised policy, net income was $486 million. No additional country has entered nonaccrual status in FY89.
GCI Subscriptions
During the first half of FY89, member countries began to subscribe to the General Capital Increase (GCI) approved in April 1988. By December 31, 1988, about 11.7 percent of the available GCI shares, some $8.76 billion, had already been subscribed. Austria, Botswana, Chile, Denmark, Ireland, Kenya and the United Kingdom subscribed all of the GCI shares available to them; while Burma, Finland, France, Indonesia, New Zealand, Norway and the United States used the extended subscription available under the GCI and subscribed part of the GCI shares allocated to them.
Borrowings
The World Bank borrowed $4.8 billion in 13 currencies in the six months ended December 31, 1988, about half of the $10 billion goal of its FY89 borrowing plan. As planned the Bank emphasized borrowings in U.S. dollars which, after swaps, accounted for 54 percent of the total. Borrowings in Japanese yen, after swaps, accounted for 26 percent; and Swiss francs and Deutsche mark accounted for the remaining 20 percent. Borrowings were made in other currencies – Australian dollars, Canadian dollars, Finnish markkaa, Italian lire, Netherlands guilders, New Zealand dollars, Spanish pesetas, Swedish kronor and European Currency Units -- with the proceeds swapped into U.S. dollars and, in one instance, Swiss francs at substantial savings compared to direct borrowings in these currencies. In addition to the borrowing plan, the Bank borrowed $1.7 billion equivalent to refinance prepayments of borrowings.
The New Zealand dollar borrowing was the first the Bank has ever made in that currency and the Swedish kronor borrowing was the first Euromarket borrowing in that currency.
Borrowings, net of refinanced prepayments, made in the first half of FY89 had an average cost, after swaps, of 7.27 percent and an average maturity of 7.4 years, compared to 6.92 percent and 10.9 years for the same period in FY88. The increase in average cost reflects mainly the higher proportion of U.S. dollar borrowings.
Selected Balance Sheet Data
At the end of the first half of FY89, the Bank's disbursed and outstanding loans totaled $84.7 billion, compared to $89,9 billion at the end of the first half of FY88. This difference of $5 billion is due principally to exchange rate changes, that is, the strengthening of the U.S. dollar against other currencies in the loan portfolio. Its other major asset - cash and liquid investments - totaled $19.6 billion. On the liability side of its balance sheet were outstanding borrowings and swaps of $88.2 billion and equity of $14.9 billion, consisting of $5.7 billion of usable paid-in capital and $9.2 billion of reserves and surplus.
Attachment I
World Bank Financial Information
(in $ billions)
| December 31. 1988 | December 31, 1987 |
ASSETS |
|
|
Cash and Investments | 19.4 | 21.0 |
Loans Outstanding | 84.7 | 89.9 |
| 104.1 | 110.9 |
Liabilities, Capital and Reserves |
|
|
Short-Term Borrowings | 4.7 | 4.4 |
Medium-and Long-Term Borrowing | 83.5 | 91.5 |
Total Borrowings, Outstanding | 88.2 | 95.9 |
|
|
|
Other Liabilities (Net of Other Assets)and Accumulated Provision for Loan Losses | 1.0 | 0.3 |
Unable Paid-in Capital, Reserves and Accumulated Net Income, Unallocated |
14.9 | 14.7
|
| 104.1 | 110.9 |
*/ The Bank’s assets and liabilities in many currencies but its financial statements are expressed in US dollars. Therefore, the translation of other currencies into US dollars at market rates of exchange results in adjustment to its assets and liabilities, including charges or credits to the general reserve.
