The World Bank raised its lending rate yesterday from 10.6 percent to a record 11.6 percent, the second boost in three months and the third so far this year.
The action, just prior to the joint annual meeting with the International Monetary Fund later this month, is based on an automatic formula that sets the lending rate one-half point over estimated borrowing costs.
It does not affect interest rates on concessional loans advanced through the International Development Association, the soft-loan affiliate of the bank. But the higher cost for World Bank loans, which have been running about $7.5 billion annually, adds one more economic difficulty for the developing nations.
World Bank officials have pointed out on previous occasions that inflation tends to erode the real value of the aid they are able to offer the poor nations. On a deflated basis, there has been little increase in the recent annual totals of World Bank lending.
Officials predicted yesterday that further increases in the bank's lending rate are in the offing. The bank's cost of borrowing money is based on a composite of interest rates in many countries. In the fiscal year that ended this July, the World Bank borrowed about $5 billion, most of it outside of the United States.
"But if we have to borrow much in the coming year in the United States, where interest rates are much higher -- and we probably will -- then the lending rate will go up again," a bank official told reporters.