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What the World Bank Is DoingDeveloping countries face a new challenge from the global financial crisis, which is rapidly becoming an unemployment crisis. The World Bank Group is helping with the financial rescue but believes that we must remain focused on the human rescue for the many millions left behind. As many as 53 million more people could be trapped in poverty as economic growth slows around the world, according to Bank forecasts. This is on top of the 130-155 million people pushed into poverty in 2008 because of soaring food and fuel prices.Sharply tighter credit conditions and weaker growth are cutting 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. Almost 40 percent of 107 developing countries were highly exposed to the poverty effects of the crisis and the remainder was moderately exposed, with less than 10 percent facing little risk, according to new World Bank Group estimates. An unprecedented global financial crisis demands unprecedented initiatives to restore growth.The Bank is calling for developed countries to pledge 0.7 percent of their stimulus packages, or as much as they can in additional money, to a global vulnerability fund to help developing countries, which can't afford bailouts and deficits. This vulnerability fund is not a new entity but a target for developed countries to scale up help to existing development actors (national aid agencies; UN agencies, multilateral development banks; non-governmental organizations, etc). The fund would focus on these three priorities: safety net programs; investments in infrastructure; support for small and medium-sized enterprises. New Bank Initiatives (updated March 13, 2009)Building on reforms already underway, the Bank Group has moved swiftly over the last year to expand and speed up lending, assistance, and advice to developing countries:
Launched a $1.2 billion Global Food Response Program (GFRP) in May 2008 to speed assistance to the neediest countries. In FY08/09 GFRP loans were processed on average in under two months.
Set up a new facility to speed $2 billion to help poorest countries by expediting approval processes for money from the $42 billion IDA 15 fund. Money will be used for safety nets, infrastructure, education and health. In February 2009, the Bank approved $35 million for Armenia and $100 million for the Democratic Republic of Congo.
IBRD could make new commitments of up to $100 billion over the next three years, the Bank announced in 2008. This year (2009) lending could almost triple to more than $35 billion compared to $13.5 billion last year to meet additional demand from our developing country partners. In December 2008, the Bank approved $500 million for structural reforms in Ukraine to help mitigate the impact of the financial crisis. The Bank also agreed to help India with $3 billion in increased investment, as part of the Bank's new country strategy. In March 2009, the Bank approved a $2 billion standby loan for Indonesia, uniquely designed as insurance for the country should the global financial crisis worsen.
The World Bank Group will provide support of about €7.5 billion to help the Eastern Europe banking sector and to fund lending to businesses hit by the global economic crisis. The financial support will include equity and debt finance, credit lines, and political risk insurance.
IBRD intends to increase lending in Europe and Central Asia up to €16 billion in 2009-10. From that up to €3.5 billion is envisaged for addressing banking sector issues in emerging Europe.
MIGA will provide political risk insurance capacity of up to €2 billion for bank lending, subject to Board approval.
IFC, through its crisis response initiatives in sectors including banking, infrastructure, and trade as well as through its traditional investment and advisory services, is expected to contribute up to €2 billion.