As Europe and the United States significantly reduce their development aid, think tanks and advocacy groups are calling on the World Bank to adjust its equity-to-lending ratio to boost its lending capacity by billions. The proposed change would allow the bank to address critical funding gaps left by shrinking foreign aid budgets.
Eric Pelofsky, Vice President of the Rockefeller Foundation, suggested that reducing the equity-to-lending ratio of the International Bank for Reconstruction and Development (IBRD) from 18% to 17% could unlock an additional $30 billion to $40 billion in lending capacity. This shift, Pelofsky emphasized, would not increase taxpayer burdens, dilute shareholder equity, or endanger the bank’s capital reserves.
Pelofsky outlined how these new resources could be used to support governments in closing budget deficits and strengthening essential public services—such as healthcare, sanitation, and water systems—impacted by cuts in foreign assistance. Additionally, the World Bank could extend short-term, low-interest loans to NGOs facing program cancellations, layoffs, and financial instability, helping them bridge the gap until new long-term funding models are established.
This proposal builds on reforms already adopted by the World Bank. Last year, the institution voted to lower its equity-to-lending ratio by 1 percentage point, a move recommended by an independent commission for the Group of 20 major economies. The bank also took similar action in 2023, reducing the ratio from 20% to 19%.
The cuts to foreign aid are largely a result of U.S. President Donald Trump’s second-term administration, which has reviewed and trimmed billions of dollars from foreign assistance programs as part of his “America First” agenda. European governments have similarly reduced their foreign aid budgets.
Pelofsky warned that failure to act could have severe consequences. Citing studies that indicate U.S. aid cuts could endanger millions of lives, he stressed the urgency of the World Bank’s intervention.
The Jubilee USA Network, a religious development organization, has endorsed the proposal. Eric LeCompte, the group’s executive director and a United Nations advisor, urged the World Bank to act swiftly. “The World Bank can and should make this decision as soon as possible,” LeCompte said. “With the significant cuts we’ve seen from the U.S. and Europe on development aid, this action by the World Bank can fill this aid gap.”
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