World Bank could provide up to $127 billion in funds for countries hit by war, president says

WASHINGTON – The World Bank could mobilise US$80 billion (S$102 billion) to US$100 billion in funding over the next 15 months for countries hit hard by the war in the Middle East, eclipsing the US$70 billion it provided during the Covid-19 pandemic, the bank’s president, Mr Ajay Banga, said on April 15.

That would include US$20 billion to US$25 billion in coming months through a crisis response window that allows countries to withdraw up to 10 per cent of funds earlier than planned from previously approved programmes, with another US$30 billion to US$40 billion that could come from repurposing existing programmes in about six months, he said.

Mr Banga’s comments, on the sidelines of the spring meetings of the International Monetary Fund (IMF) and World Bank, reflect growing recognition of the huge impact the war is already having on global growth and inflation, with developing countries likely to be hit the hardest.

The IMF on April 14 cut its global growth outlook due to war-driven energy price spikes, offering a range of scenarios that all include lower growth and higher inflation. Absent the conflict, the IMF said it would have upgraded its growth outlook by 0.1 percentage point to 3.4 per cent.

If the war lasted longer and greater needs emerged, the bank would have to turn to its balance sheet and headroom to find additional funding to reach the US$80 billion to US$100 billion, Mr Banga told an event hosted by the Bretton Woods Committee. That would come on top of the bank’s normal lending.

“I’m trying to create a toolkit that has a tiered response capacity, depending on how this continues, to at least be able to bring adequate firepower to do something about it,” he said.

Mr Banga, who met with the head of the International Energy Agency and IMF chief Kristalina Georgieva on April 13, stressed that it would take time for the energy market to settle down, even if the war ended and there was no more structural damage to energy infrastructure.

The global economy can still recover rapidly from the shock of the Middle East war if the conflict ends in the next weeks, but the situation will be worse if it drags through the summer, Ms Georgieva said in separate remarks to the same event.

Ms Georgieva said the IMF was in talks with countries hit hard by higher energy prices and supply chain disruptions to discuss their financial needs.

Both Mr Banga and Ms Georgieva urged countries to focus on narrowly targeted and temporary measures to ease the pain of higher energy prices, and to avoid broader energy subsidies that could wind up further stoking inflation. REUTERS