World Bank President Ajay Banga announced on Sunday that the bank is engaged in discussions with 30 to 40 countries regarding potential support to help them manage the energy and price crises triggered by the ongoing conflict in the Middle East. According to Banga, the global economy has demonstrated resilience, largely due to significant investments in artificial intelligence and adjustments in oil supply and demand.
Banga noted that only a few countries have requested the initial $25 billion in crisis funds made available by the World Bank when the conflict began in late February. However, he warned that the sharp increase in diesel and fertilizer prices, along with the impending extreme El Niño phenomenon, pose significant challenges to developing countries. As a result, more countries may seek assistance in the coming months.
The World Bank has made $50 to $60 billion available, including the initial $25 billion and an additional $35 billion that countries can access by repurposing resources from existing projects. Banga emphasized that the bank is prepared and engaged in discussions with several countries. The bank's support aims to help developing countries address the impact of the crisis on their economies.
Many developing countries have been severely affected by the surge in energy prices and interest rate hikes, which have increased borrowing costs at a time when their finances are still recovering from the COVID-19 pandemic and rising inflation following the Russia-Ukraine war. According to World Bank estimates, developing countries will owe external creditors approximately $400 billion by 2026, with interest payments alone accounting for a third of this amount.
Banga revealed that more countries are expressing interest in restructuring existing projects rather than seeking immediate crisis financing to meet their liquidity needs. In the event of a worsening situation, the World Bank may provide up to $100 billion in financing, exceeding the $70 billion disbursed during the pandemic. This commitment demonstrates the bank's willingness to support countries in need.
The World Bank has invested $123 billion of its own resources, bringing the total to $235 billion. Banga stressed the importance of leveraging all available resources, particularly in a time when Western countries have significantly reduced official development assistance. The bank's efforts aim to mitigate the impact of the crisis on developing countries and support their economic recovery.
In a positive development, the World Bank announced last month that it has attracted a record $112 billion in private capital in the year ending in June, more than triple the amount in 2022. This significant influx of private capital will enable the bank to support its development goals and provide critical financing to countries in need.
Key points
- The World Bank is prepared to provide up to $100 billion in financing to support developing countries affected by the Middle East crisis.
