Grants, interest-free loan requests reach record US$13 billion
In the face of a lack of adequate public sector financing to respond to the current global economic crisis the World Bank has identified encouraging private sector business activity as critical to the global recovery effort.
The observation by the world’s leading multilateral financing agency comes amidst bleak predictions of “multiple waves of economic stress” for poor countries in the period ahead.
According to the Bank ”low reserves and drained national budgets” mean that developing countries now have little option but to rely increasingly on multilateral borrowing in an effort to help stave off the effects of a continually declining economy. And according to the statement the Bank is already bracing itself to more than double its loan volume from US$13.2 billion last year to US$33 billion this fiscal year.
And according to the World Bank statement poor countries could face economic difficulties that are likely to extend into 2010 in the face of an ongoing decline in their main sources of foreign earnings.
While the global economic and financial crisis has already seen a significant reduction in financial inflows to developing countries, the statement by the World Bank says that the situation is likely to further worsen unless the slump in exports, remittances and foreign direct investment is reversed.
The World Bank pronouncement comes against the backdrop of concerns that have already been expressed by the local private sector in the face of significantly reduced remittance flows, loss of markets for vital exports, primarily bauxite and wood products and attendant job losses in the productive sector. And the statement has pointed to what it says will be the need to “roll over large amounts of private sector debt in developing countries,” an eventuality that has already been raised by local private sector officials.
The statement by the World Bank expresses grave concern for the welfare of “the poor in many developing countries” whose “low reserves and drained national budgets” mean that they will face particular difficulties in securing financing in the next few years. “Because of this lending from the World Bank, the IMF and other sources will become increasingly important as the crisis rolls across low-income countries,” Bank President Robert Zoellick is quoted as saying.
“Although growth is expected to revive during 2010 the pace of the recovery is uncertain and the poor in many developing countries will continue to be buffeted by the aftershocks,” Zoellick says.
Pressure on developing countries to seek multilateral support is already reflected in an all-time US$13.2 billion in grant and interest-free loan requests to the International Development Agency (IDA), part of the World Bank Group that focuses on the world’s 78 poorest countries. At the same time the Bank’s fast track lending facility set up last December to provide rapid funding for social safety nets, infrastructure, education and health is also expected to be busy in the period ahead.
