The purpose of the investment is "to support Ukraine and the countries in its region in solving urgent development problems," according to a release from the Ministry of Finance (FM).
At the same time as Latvia, Denmark and Norway also announced new investments.
Hybrid capital is a financial mechanism that allows World Bank shareholders, including Latvia, to significantly increase the lending capacity of the International Bank for Reconstruction and Development (IBRD) at any time by providing financing to developing countries, the Ministry explained.
Ašeradens said: "Latvia's investment in the World Bank is an innovative way of attracting funding. This gives Latvia the opportunity in the next decade to additionally increase financial support for Ukraine and the countries of the region, which are facing upheavals caused by the Russian war. Latvia effectively uses the World Bank's ability to increase financing through financial markets, taking into account its high AAA credit rating, priority creditor status and long-term financial stability. This gives us the opportunity to act immediately to make a real impact.”
According to the World Bank, "Hybrid capital offers a new way to move the needle in development—by giving shareholders and partners an opportunity to invest in bonds with special leveraging potential. With $1 billion of hybrid capital, the Bank can increase its lending by up to $6 billion over 10 years and deepen its impact on the people most in need."
