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PRESS RELEASE July 11, 1989

World Bank Announces Reduction in Loan Charges

The World Bank announced a sharp reduction in the commitment fee it charges on undisbursed loan balances from 0.75 to 0.25 percent for the fiscal year starting July 1, 1989. The reduction by two-thirds in the commitment fee was made possible by the Bank's strengthened reserve prospects in relation to its loans as a result of its new currency management system and the reduced funding risks that have resulted from the Bank's variable rate lending system.

The reduction will save the Bank's borrowers about $200 million a year.

The World Bank also announced the interest rates applicable to its loans for the six months starting July 1, 1989. These will be 7.74 percent and 7.73 percent. The 7.74 percent rate applies to loans initiated under the Bank's new currency management system which took effect May 18, 1989 and previous loans converted to the new system. The 7.73 percent rate applies to all other variable rate loans. Under the new currency management system only those borrowings actually used to fund loan disbursements are included in the cost base. The rate for earlier loans is based on the cost of all outstanding borrowings since July 1, 1982, including those funding the Bank's liquid investments of approximately $19 billion.

The Bank expects to announce its· financial results for the fiscal year which ended on June 30, 1989 on July 19.