WASHINGTON, DC, March 12, 2012 — The World Bank’s Executive Directors approved a proposal that extends the embedded interest rate and currency risk management tools currently offered by IBRD on loans with a fixed spread to new and existing loans with a variable spread, without first having to convert such loans to a fixed spread.
This enhanced flexibility will provide borrowers with additional alternatives for reducing exposure to financial shocks due to interest rate and foreign exchange volatility and allow for greater predictability of debt service payments.
This change may affect borrowers in the following ways:
- Borrowers with loans negotiated and signed after March 12, 2012 will sign a revised loan agreement (incorporating the new General Conditions) which includes the enhanced risk management options. Borrowers may, once the loans are effective, request conversions based on the enhanced flexibility in respect of such loans.
- Borrowers with currently outstanding variable spread loans have the option of requesting conversions based on this enhancement following amendments to the related loan agreements.
- Borrowers with loans negotiated, but not yet signed, may request to use the revised loan agreement (incorporating the new General Conditions), either before or after Board presentation of the loan. After this change, borrowers may, once the loans are effective, request conversions based on the enhanced flexibility in respect of such loans.
For more information about this change, please send us an email at FAB@worldbank.org.