The World Bank achieved solid financial results in fiscal 1992 and its balance sheet is well positioned to meet the operational challenges of the coming period. The net income of the International Bank for Reconstruction and Development, as the World Bank is formally known, 1.65 billion in the fiscal year ended June 30, 1992, up 37 percent from $1.20 billion in the previous year. The World Bank disbursed nearly $12 billion to developing countries last year and made new loan commitments for over $15 billion. The variable lending rate declined by 13 basis points to 7 .60 percent and the Ban1c instituted a lending rate waiver policy which further lowered borrowing costs on World Bank loans. Nearly three-quarters of its borrowers were eligible for a waiver of 25 basis points of the lending rate given only when all payments over the preceding semester have been made within thirty days of the due date.
Improvements were made in loan portfolio quality through a decrease in the number of countries and the share of the loans in nonaccrual status. In addition, three countries remaining in nonaccrual status have been making debt service payments. Payments related to prior years, but received this year from countries which cleared arrears, contributed over $220 million to this year's income. Loan loss provisions were maintained at a constant 2.5 % proportion of the total loan portfolio.
Further highlights of the past fiscal year include a $13 billion increase in subscribed capital and an increase in authorized capital to accommodate new member countries from the former Soviet Union.
In FY92, the Bank borrowed $11.8 billion equivalent of medium- to long- term funding in the world's financial markets and refinanced $5.4 billion equivalent of short-term borrowings. While the Bank's medium and long-term direct borrowings were in 11 currencies on a before-swap basis, after-swap funding in U.S. dollars, Japanese yen, and Deutsche mark and Swiss francs. The average cost of medium and long-terms borrowings in FY92, with an average maturity of seven years, dropped to 6.69 percent from 8.06 percent in PY91.
The Bank´s FY92 offerings featured two global bond issues in U.S. dollars totaling $3.0 billion, its first global bond issue denominated in Japanese yen equal to yen 250 billion ($1.9 billion equivalent), and its first borrowings in Portuguese escudos.
Liquid holdings did not change appreciably over the year. At the end of FY92, liquid investments totaled 20.8 billion equivalent. The Bank's primary objective in holding liquidity equal to or in excess of 45 percent of the next three years' net cash requirement is to ensure flexibility in its borrowing decisions. In FY92, liquid assets earned a financial return of 8.07 percent, compared to 9.23 percent in FY91.
Commitments and Disbursements
FY92 loan commitments by the World Bank amounted to $15.2 billion, compared to 16.4 billion in FY91. Disbursements on loans to countries were $11.7 billion in FY92, compared to $11.4 billion in the previous year.
The Bank continued its policy of provisioning against possible loan losses based on assessment of collectability risk of the total loan portfolio, including loans in nonaccrual status. The Bank's consolidated provisions were $2.54 billion, equal to 2.5 percent of loans outstanding, through the addition of $353 million to provisions.
Six countries in nonaccrual status at the end of FY92 accounted for 2.1 percent of loans outstanding, down from eight countries and 2.8 percent at the end of FY91. Nicaragua, Panama and Sierra Leone cleared their arrears during the year, Zambia entered and left nonaccrual status, and Congo entered nonaccrual status. Guatemala, Peru, and Syria remain in the nonaccrual category but all three are making debt service payments to the Bank.
Reserves to Loam Ratio
The Bank's reserves-to-loans ratio was 11.5 percent at the end of FY92 and reserves were $11 billion (all figures excluding prefunding of interest waivers). Reserves are held in the same currency shares as loans.
Member governments continued their subscriptions to the current General Capital Increase approved in April, 1988. At the end of FY92, the Bank's total subscribed capital was $152.2 billion, up from $139.1 billion in FY91.
On April 24, 1992 the Board of Governors approved a capital increase of $9.3 billion or 77,159 shares to provide for the membership of the Republics of the former Soviet Union. The total authorized capital of the Bank is now $184.l billion. Switzerland recently became a member of the World Bank. Membership applications have been received from all 15 Republics, and to date, Russia, Kazakhstan, Estonia, Lithuania, and Belarus have joined bringing total membership to 163 countries.
Data in this release are preliminary and unaudited.
WORLD BANK SELECTED BALANCE SHEET DATA
Total Earnings Assets
Cash and Liquid Investments
Disbursed and Outstanding Loans
Reserves, Usable Capital & Surplus
Accumulated Provision for Loan Losses
Due to IDA & Debt Reduction Facility, & Net Other Assets
WORLD BANK AVERAGE COSTS, PROFITABILITY AND RETURNS
(Percentages, based on average balances during fiscal year)
Fiscal Year Costs
New Borrowings, Medium-to Long-Term1/
Total Debt Outstanding
Total Funds (Debt&Equity2/
Fiscal Year Returns
Loans Disbursed and Outstanding3/
Liquid Investments 4/
Total Earning Assets
Net Return on Average Earning Assets (Cash, Liquid Investments and Loans)
Reserves-to-Loans Ratio 5/
1/ Excludes short-term borrowings.
2/Equity is defined as usage paid-in capital, reserves and surplus.
3/ Interest on loans plus commitment fees on undisbursed loan balance as a percent of average disbursed and outstanding loans.
4/Represents financial return (including unrealized changes in market value).
5/ Reserves (Genera plus Special) divided by the sum of the principal amount of disbursed and outstanding loans plus the present value of callable guarantees less cumulative loan loss provisions. (Prefunding of interest waivers is excluded from the General Reserve for purposes of calculating the Reserves-to-Loans Ratio).
THE WORLD BANK
Selected Financial Data for FY92
($ million, end-year)
New Borrowings, Medium-to Long-Term
Interest Rate Swaps
Average Life of Borrowed Funds (Yrs.)
Loans, Outstanding and Disbursed
Cash and Liquid Investments
Accumulated Provision for Loan Losses
Interest Coverage Ratio (End Year)
1/ General plus Special Reserves excluding prefunding of interest waivers ($200 million in FY92 and zero in FY91.)