What should the IMF and World Bank do to lower the cost of development finance? Ahead of their 2026 Annual Meetings in Bangkok, we bring together perspectives from Africa, Latin America, India and Europe, with proposals for making finance more affordable, addressing unsustainable debt and supporting the clean energy transition.

The IMF and World Bank should provide more affordable finance, not just mobilise private capital

The high cost of financing for the Global South isn't simply a matter of market perception. It's also the result of a financial architecture that systematically penalises the countries with the greatest development and climate investment needs — where shocks like rising global interest rates can quickly push up borrowing costs. The IMF and World Bank must help change these structural conditions.

Both institutions should move beyond merely "mobilising private capital" and use their own financial capacity to directly reduce the cost and increase the volume of financing countries need, especially as crises compound. A stronger, more equitable global financial safety net would give developing countries greater capacity to absorb external shocks without resorting to costly borrowing or policies such as spending cuts during a downturn, which tend to deepen it. The IMF plays a key role here.

The IMF can use its balance sheet more ambitiously to provide affordable, countercyclical liquidity: financing that expands when a country is hit by a shock, instead of drying up. This includes expanding short-term financing without policy conditions attached, and replenishing and reforming the Catastrophe Containment and Relief Trust — the IMF's emergency debt-relief fund for the poorest countries.

It also means issuing and reallocating Special Drawing Rights, the IMF's own reserve asset, more equitably. This should include breaking the link between SDR allocation and IMF quotas, which currently favours the largest, wealthiest shareholders. The IMF should also eliminate surcharges — additional charges on large or prolonged borrowing.

The World Bank and other multilateral development banks should significantly expand affordable, long-term financing by making fuller use of their own balance sheets: more capital, more countercyclical lending, longer maturities, and stronger access to concessional resources — financing offered on more favourable terms than market rates — for low- and middle-income countries. Guarantees and credit enhancements should not substitute for direct public financing, or expose already indebted countries to additional payment obligations if guarantees are called.

Both institutions should also back regional financial cooperation — in Latin America, for instance, mechanisms that provide liquidity during shocks and reduce reliance on costly private capital.

Finally, lowering the cost of financing means tackling debt burdens directly: timely, comprehensive debt restructuring and relief, and a debt sustainability approach that weighs development and climate needs — not just a country's narrow capacity to keep servicing debt.

- Patricia Miranda, Rodolfo Bejarano and Daniela Berdeja, LATINDADD

There are three ways the IMF and World Bank can lower the cost of clean energy finance

Clean energy technologies like solar and wind have near-zero operating costs, but high upfront equipment and construction costs — which makes the pace of the energy transition closely tied to the cost of capital: the cost of financing a project. Even for mature technologies like utility-scale solar, this cost is generally higher in developing countries than in developed ones.

2025 data from the IEA Cost of Capital Observatory shows this starkly: the median cost of capital for utility-scale solar PV can be almost twice as high in emerging economies (up to around 13%) as in advanced economies (up to around 6.5%). Much of that gap comes from "risk premia" — the extra return investors demand for perceived risk — which is driven substantially by perception, not always by the actual fundamentals of the project. This creates a higher "borrowing floor" for some countries than others, making clean investment structurally more expensive.

The World Bank and IMF, as the most influential institutions shaping the cost of money for developing countries, must move beyond piecemeal project-level de-risking and address the structural causes. Three shifts matter most.

First, the World Bank must scale up concessional lending through the International Development Association (IDA), which provides low-cost lending to the poorest countries by design. Alongside this, MDB reform through G20 Capital Adequacy Framework recommendations — including recognising the $1.2 trillion "backup cushion" of callable capital to expand non-concessional lending without threatening AAA status — remains necessary too, since preserving that top rating is precisely what keeps MDBs' own funding costs, and in turn their lending rates, low.

Second, World Bank agencies like MIGA and other MDBs can take more first-loss positions — absorbing the first losses on a clean energy investment to make it safer for private lenders to join. But this needs caution: it risks spending scarce public funds to absorb private losses while leaving private profits untouched, and project-level guarantees don't fix the underlying sovereign risk and currency volatility that keep private capital away in the first place.

Third, the Bretton Woods institutions must push credit rating agencies to decouple sovereign ratings from GDP per capita, which functions as a proxy for income rather than genuine creditworthiness.

Together, these point to one conclusion: closing the clean energy financing gap in developing countries means fixing how capital is priced and allocated systemically — not simply adding more of it project by project.

- Sehr Raheja, Centre for Science and Environment India

The IMF and World Bank should recognise that Africa’s debt crisis requires debt restructuring, not just more financing

A 2023 UNDP study found that Africa loses more to higher borrowing costs and lost investment — the "Africa premium" — than it receives in aid and climate finance combined, despite the lowest sovereign default rate of any region: 1.9%, against 12.4% in Eastern Europe and 10% in Latin America. The premium stems from ratings set by non-African agencies, a debt sustainability framework that until recently treated climate shocks as background risk, and heavy reliance on foreign-currency debt.

Most African governments borrow in dollars or euros while earning revenue locally, so depreciation alone raises the local-currency cost of servicing that debt. Yet multilateral development banks overestimate this currency risk relative to actual default data, and remain reluctant to lend in African currencies, citing their own credit ratings and capital rules. This is development finance's "original sin": countries can't borrow in their own currencies not because they are riskier, but because global finance's rules were written by — and still serve — the economies whose currencies those rules favour.

Africa isn't waiting on the sidelines. The Africa Credit Rating Agency (AfCRA) — backed by the African Union, launching in Mauritius in October 2026 — will offer Africa-based sovereign and corporate ratings, aiming to address the bias directly. The African Development Bank has also proposed rechannelling $100 million in rich-country Special Drawing Rights as hybrid capital, potentially unlocking $300–400 million in climate and development lending. The IMF's board approved this use of SDRs, but — despite repeated African Union calls through its Common African Position on Debt — no funds have moved, largely because the European Central Bank bars Eurozone countries from lending SDRs this way, citing central bank independence.

These initiatives alone cannot dismantle a financial architecture whose core mechanisms — ratings, currency structures and creditor rules — remain outside Africa's control. Africa's debt crisis remains a solvency, not liquidity, problem: debt stocks exceed what governments can plausibly repay from future revenue. Treating a solvency crisis as a liquidity crisis only defers the unpayable debt, prolonging distress and keeping borrowing costs high. Global South governments and civil society are pushing a binding UN Framework Convention on Sovereign Debt — enforceable restructuring timelines, mandatory comparable treatment across creditors, and a global debt registry to close transparency gaps that let opaque premiums go unchallenged.

Real reform requires all three to converge: African institutions correcting bias and deepening local markets from within, the Bretton Woods institutions treating solvency crises as what they are, and a binding UN debt convention to resolve — not merely manage — unsustainable debt.

MDBs should lend more in African currencies and take on more of the currency risk, and the IMF and World Bank should support comprehensive debt restructuring rather than treating solvency crises as liquidity problems.

- Catherine Mithia, African Forum and Network on Debt and Development (AFRODAD)

The price of the AAA rating: The World Bank should share risk more fairly

The World Bank is the main source of external finance for many low- and lower-middle-income countries. In Nepal and Malawi, for example, Bank loans make up roughly half of the external debt stock, shaping the overall cost and composition of that debt.

The Bank's "preferred creditor status" can also make borrowing from other creditors more expensive: when a country's debt becomes unsustainable and must be restructured, World Bank loans are excluded from the restructuring, leaving other creditors to bear the losses. This isn't written into any treaty — it is upheld in practice by the major shareholder governments that control the Bank's board.

Knowing this, those other creditors charge low-income borrowers higher risk premiums up front, to cover the risk the Bank itself won't share.

The Bank also avoids risk in normal times: it lends mostly in dollars rather than local currency, shifting currency risk onto borrowers — a weaker local currency makes the same dollar debt more expensive to repay — and it attaches fiscal and financial-management conditions to its loans. Proponents argue that these arrangements protect the Bank's AAA credit rating, which in turn lets it borrow cheaply and pass the savings on to client countries.

But the causality may run the other way. Borrower countries' own low credit ratings may, in part, be a consequence of a lending relationship in which the borrower carries nearly all the risk and the Bank carries almost none — leaving borrowers dependent on the Bank, since alternative finance is prohibitively expensive.

The World Bank should redesign this model to share risk more fairly, even if that costs it the AAA rating. Among other things, this implies making a fair contribution to debt restructuring where necessary, assuming more exchange rate risk, and investing in countries and sectors where project and default risks are high. For context: the United States, whose currency the Bank primarily lends in, is itself only rated AA+. A development bank that protects its own rating at its borrowers' expense works against its own purpose.

- Bodo Ellmers, Global Policy Forum (GPF) Europe

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Will you be at the World Bank and IMF Annual Meetings in Bangkok? Join us on 13 October at our side event (Rising cost of development finance: How the Bretton Woods Institutions can deliver development) to discuss this topic — making financing more affordable, easing debt distress and supporting sustainable development and a just energy transition in the Global South.

Attendance requires Annual Meetings accreditation. The event will also be livestreamed.