World Bank aims to reduce debt costs for developing nations

The World Bank is developing 14 to 15 operations to help developing countries lower their debt costs, as announced by its president, Ajay Banga, in an interview before the annual meetings of the IMF and the World Bank in Bangkok.

Mechanism allows debt replacement with cheaper financing

The mechanism, already tested in Côte d'Ivoire and Angola, allows governments to replace expensive loans with cheaper financing and use the savings for social projects like education, health, and environmental protection.

Debt burden remains a major challenge for developing countries

Many developing countries are struggling to fund their essential needs, as they will have to pay around 400 billion dollars to external creditors in 2026, with nearly a third going toward interest payments. High borrowing costs limit their budget flexibility.

World Bank provides guarantees, not direct debt repayment

The World Bank does not directly repay countries' debts but provides guarantees to commercial banks, allowing them to offer more favorable loan terms. Governments can then use these funds to repay more expensive loans earlier.

Goal is to reduce interest costs and extend repayment periods

The objective is to lower the interest paid and spread repayments over a longer period, freeing up resources for development projects. This process is called debt-for-development exchange, and it involves refinancing rather than canceling debt.

World Bank plans to expand guarantees in Africa

In May 2026, the World Bank announced plans to more than double its annual guarantees in Africa, aiming for 6.4 billion dollars by 2030. The goal is to mobilize 23 billion dollars in private capital for infrastructure, energy, and financial services.

Côte d'Ivoire uses refinancing to fund education

Côte d'Ivoire launched a refinancing operation in 2024, covering nearly 400 million euros of commercial debt. The new loan terms are expected to free up about 330 million euros in budget resources over five years, with part of the savings going toward building schools.

Angola follows similar model to improve education

Angola obtained support from the World Bank and its investment guarantee agency, MIGA, to refinance up to 400 million dollars of commercial debt. The savings are expected to help build 30 additional secondary schools, benefiting over 32,000 students.

Mechanisms vary and may not suit all countries

While these operations help some countries manage debt better, they may not be suitable for all. Countries with unsustainable debt may need broader restructuring. The World Bank has not specified the countries or total amount involved in the upcoming 14 to 15 operations.