World Bank President Ajay Banga said on Tuesday that the bank may be able to mobilize between 80 and 100 billion dollars to finance countries severely affected by the consequences of the war in the Middle East, within a period of approximately 15 months. He pointed out that this amount exceeds the $70 billion provided by the bank during the Covid-19 pandemic.
Banga explained that the funding includes an amount ranging between $20 and $25 billion that countries can benefit from through the crisis response window, which allows them to obtain up to 10% of the funding approved within existing programs. He added that another $30 to $40 billion could be saved by redirecting existing programs within an estimated period of approximately six months.
Banga’s statements came on the sidelines of the spring meetings of the International Monetary Fund and the World Bank, and indicate a growing awareness of the significant impact that the war is already having on global growth and inflation, with developing countries expected to be the most affected.
In a related context, the International Monetary Fund on Tuesday lowered its global growth forecasts due to the rise in energy prices resulting from the war, and presented a set of scenarios that all include a decline in growth and a rise in inflation. The Fund indicated that had it not been for the war, it would have raised its growth forecast by 0.1 percentage point to 3.4%.
Banga added that if the war continues for a longer period, the bank will have to resort to its balance sheet and available resources to find additional financing to reach the required amount, which ranges from 80 to 100 billion dollars, and this will be in addition to the bank’s usual lending.
He said: “I am trying to create a set of tools with the ability to respond gradually, according to developments in the situation, to be able to at least provide sufficient support to do something (in order to confront the repercussions of the war).”
Banga emphasized that stabilizing the energy market will take time, even if the war ends and there is no longer any structural damage to the energy infrastructure.
It is noteworthy that Banga met with the head of the International Energy Agency, Fatih Birol, and the director of the International Monetary Fund, Kristalina Georgieva, last Monday.
Georgieva said, in separate statements during the same event, that the global economy can still recover quickly from the shock of the Middle East war if it ends in the coming weeks, but the situation will get worse if it continues throughout the summer.
Georgieva added that the IMF is holding talks with countries severely affected by high energy prices and supply chain disruptions to discuss their financial needs.
Both Banga and Georgieva urged countries to focus on targeted and temporary measures to cushion the blow of rising energy prices and avoid broader subsidies that could ultimately lead to higher inflation.
