World Bank boosts support for developing countries
Calling for a rapid response to the spreading global financial crisis, the World Bank Group said it would substantially increase financial support for developing countries, including the launch or expansion of four facilities for the crisis-hit private sector that is critical to employment, recovery and growth.
Making the announcements ahead of a G20 summit this weekend, the World Bank Group said its International Bank for Reconstruction and Development could make new commitments of up to US$100 billion over the next three years. This year, lending could almost triple to more than US$35 billion compared to US$13.5 billion last year. This increase in financial support will protect the poorest and most vulnerable from harm, support countries facing big budget short-falls, and help sustain long-term investments upon which recovery and long-term development will depend.
At the same time, the World Bank lowered its growth forecast for developing country economies to 4.5 percent for 2009, compared to a previous projection of 6.4 percent, due to a combination of financial turmoil, slower exports and weaker commodity prices. It expects high income country economies to contract by 0.1 percent next year while the world economy ekes out only one percent growth.
“Leaders meeting on Saturday to discuss the global financial crisis must not lose sight of the human crisis. As always, it is the poorest and most vulnerable who are the hardest hit,” said World Bank Group President Robert B. Zoellick. “The response to this crisis must be global, coordinated, flexible and fast. While the challenges need to be addressed at the country level, it is more critical than ever that the international community acts in a coordinated and supportive way to make each country's task easier.”
Sharply tighter credit conditions and weaker growth are likely to cut into government revenues and their ability to invest to meet education, health and gender goals, as well as the infrastructure expenditures needed to sustain growth. Current estimates suggest that a one percent decline in developing country growth rates pushes an additional 20 million people into poverty. Already 100 million people have been driven into poverty as a result of high food and fuel prices.
“The global financial crisis, coming so soon after the food and fuel crises, is likely to hurt the poor most in developing countries,” said Zoellick. “Working with the IMF, UN agencies, regional development banks and others, the World Bank Group is helping both governments and the private sector through lending, equity investments, innovative new tools, and safety net programs.”
Aside from expanded lending, the World Bank Group is also working to speed up grants and long-term, interest-free loans to the world's 78 poorest countries, 39 of which are in Africa. Donors last year pledged US$42 billion for the International Development Association, the World Bank's fund for these countries. The Bank is working with the poorest countries to accelerate this support as needed, especially in those countries which had plans to enter capital markets, or are under stress from falling commodity prices, slower export demand or lower remittances.