World Bank Board Set to Clear Plan In Bid to Help Poor Countries Sell Bonds
WASHINGTON -- Hoping to lure private capital back to emerging markets, the World Bank plans to provide guarantees to help poor countries sell bonds to international investors.</br></br>The bank's board is expected on Tuesday to approve the new policy, which could last as long as two years. The partial guarantees, limited initially to a total of $2 billion, are intended to restore investor confidence in governments that adhere to sound economic policies but whose ability to borrow on international capital markets has been undermined by investor panic. That situation has been a common one during the financial upheaval of the past 20 months.</br></br>The guarantee program, which could also apply to commercial-bank loans, is one component of a broader international effort to prevent and resolve financial crises. The bank, the International Monetary Fund and the rich countries that fund them are trying to make as much progress as possible on those initiatives in time for the World Bank/IMF spring meetings, here at the end of the month.</br></br>A centerpiece of that effort is the search for ways to encourage private investors -- an increasing source of financing for developing countries during the 1990s -- to return to emerging-market bonds and to stay when things get shaky.</br></br>The World Bank and IMF are walking a fine line. They don't want to bail out private investors who already receive high yields on emerging-market bonds because the investors are taking big risks. But the institutions also want to be sure that deserving emerging-market governments have access to private capital even when markets are nervous. World Bank guarantees would make the bonds less risky; in exchange, investors presumably would accept lower interest rates.