The World Bank’s president, Ajay Banga, said that the organization is in talks with 30 to 40 nations regarding possible crisis assistance to help them deal with energy shocks and price hikes brought on by the Middle East conflict.
Few nations had applied for the $25 billion in crisis funding that the World Bank had made available when the conflict started in late February, according to Banga, because the global economy had proven to be rather resilient, partly because of significant AI investments and changes in the supply and demand for oil.
However, Banga stated in an interview ahead of this week’s annual meetings of the World Bank and International Monetary Fund that a rapid increase in diesel and fertilizer prices, along with other variables like the impending severe El Niño weather phenomenon, were adding to the difficulties facing developing countries.
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Banga stated, “There is pressure, and so I think maybe over the coming months, more countries will come for some slice of that first $50 to $60 billion,” alluding to the initial $25 billion plus an additional $35 billion that nations could access by taking funds away from World Bank projects that have already received approval.
“We’re prepared, but we’ll see. We have an engagement. Thirty to forty countries are in contact with us, and we’re having conversations with many of them,” he stated.
Many developing nations have been severely impacted by the rise in energy prices and high interest rates, which have raised borrowing costs at a time when the COVID-19 pandemic’s measures and the inflation spike that followed Russia’s invasion of Ukraine have further depleted their fiscal coffers.
The World Bank said this month that it received a record $112 billion in private funding in the year that concluded in June, up from $69 billion the previous year.
This amount more than tripled the amount received in 2022 before Banga, a former CEO of Mastercard, took office.
According to Banga, this was in addition to the $123 billion that was invested that year from the bank’s own resources, for a total of $235 billion.
This highlights the significance of utilizing all available resources, particularly at a time when Western nations have drastically reduced official bilateral development contributions.
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“Global crises require tailored solutions—countries must live within their means,” Banga said.
He expects private investment to surge, driven by stronger political risk guarantees, more local currency financing, and regulatory reforms that attract foreign capital.
Middle-income nations like India and Argentina drew $87B in private capital, while low-income states stalled at just $3B.
Banga noted severe challenges in smaller nations, prompting the bank to launch new initiatives for small businesses this week.
Regionally, Latin America led the surge with $36.3B, followed by Africa ($22B), Europe/Central Asia ($21.3B), and South Asia ($19.2B).
The World Bank and IMF are teaming up to tackle developing nations’ heavy debt, with a strong focus on boosting local tax collection.
The Bank has already deployed debt-for-development swaps in Angola and the Ivory Coast, plus a portfolio guarantee for Argentina.
Banga revealed 14 to 15 more projects are underway to refinance expensive old debt with cheaper, guaranteed loans, redirecting the savings into education, healthcare, water, and nature programs.
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