World Bank: Dale Lautenbach
WASHINGTON, DC, July 2, 2009 – The World Bank Group committed US$6.6 billion in fiscal year 2009 (July 1, 2008 – June 30, 2009) to South Asia, focusing especially on reviving growth and protecting the poor amid the global economic crisis. This is an increase of US$1.1 billion over the previous year.
The Bank Group invested in 89 projects to promote economic growth, fight poverty, and assist private businesses, including nearly US$2 billion in infrastructure financing, a critical sector to provide the foundation for rapid recovery from the crisis and job creation.
Much of the Bank’s support focused on helping South Asian countries cope with the impact of the global economic crisis. For example, the Bank provided US$500 million to support the Government of Pakistan’s program to regain and maintain economic stability and steer the economy back onto a higher growth path. In India, a US$400 million loan was extended to improve access to finance for India’s Small and Medium Enterprises (SMEs) which face serious challenges in accessing adequate and timely financing on competitive terms.
“South Asian countries have been hard hit by a series of crises—food, then the fuel crisis, followed by the global financial crisis,” said Isabel M. Guerrero, World Bank Vice President for South Asia. “In response to the impact of these successive crises much of our work has been refocused to provide rapid financial assistance and policy advice to reverse the slowdown in growth and investment and to protect the poor and most vulnerable people.”
Globally, the World Bank Group committed US$58.8 billion in fiscal year 2009, up 54 percent from fiscal year 2008. Commitments from the International Bank for Reconstruction and Development (IBRD)—which provides financing, risk management products, and other financial services to countries—rose sharply in FY09 to $32.9 billion for 126 operations, from US$13.5 billion the previous year. Commitments from the International Development Association (IDA), which provides interest-free loans and grants to the world’s 79 poorest countries, totaled a record US$14 billion in FY09, up 25 percent from US$11.2 billion in FY08.
“Requests for assistance from the World Bank Group rose sharply this year, and we expect this to continue well into 2010, as the pace of recovery is far from certain,” said World Bank Group President Robert B. Zoellick. “Millions of people are still suffering, and we must continue to help countries safeguard priority expenditures, including on essential infrastructure, investment in human capital, and social safety nets, or we will further jeopardize hard-fought gains over recent years in overcoming poverty.”
Within South Asia, India was the largest borrower from IBRD and IDA, accounting for US$2,242 billion. Pakistan was the second largest borrower with US$1,609 million (IDA), followed by Bangladesh at US$1,096 million (IDA).
IBRD and IDA Lending in South Asia (Amounts in millions of US dollars)
Key to the Bank’s strategy in South Asia is scaling up existing programs that are delivering results. For example, in fiscal year 2009 the Bank approved US$250 million for the Pakistan Poverty Alleviation Fund (PPAF), a program the institution has supported since 2000. During this time, PPAF has facilitated the formation of 80,000 community organizations and provided 1.9 million micro-credit loans and 16,000 community infrastructure schemes. Similarly in Afghanistan, the Bank committed US$75 million to Afghanistan’s National Solidarity Program, a rural development initiative that has reached over 22,000 villages—about 68 percent of the rural population.
The International Finance Corporation (IFC), which makes equity investments, and provides loans, guarantees, and advisory services to private-sector business, committed close to US$1.2 billion in 47 projects in FY09 in South Asia. A third of the commitments this year were in infrastructure to support the acute financing needs of the sector in the region. A quarter of the program focused on the financial sector and the balance in manufacturing, agribusiness, health, and education sectors. In response to the scarcity of trade financing after the global economic slowdown, the region committed US$100 million in trade finance facilities to support local enterprises. As many as 15 projects in the region have a climate change component.
Paolo M. Martelli, Regional Director for IFC South Asia, said, “IFC's priority has always been to stand by our clients in the private sector. In difficult times, our role becomes even more critical. This year, IFC focused on the region's needs in infrastructure, on renewable, and clean production projects with significant development impacts."
IFC’s strategy in the South Asia region supports inclusive growth by increasing access to infrastructure and finance, focusing on low-income, rural, and fragile regions and making climate change central to its work, targeting areas where IFC can make the biggest difference. Through its advisory work, IFC addresses critical areas such as business environment reform, sustainable supply chains, access to finance, infrastructure, energy efficiency, and clean production.
The Multilateral Investment Guarantee Agency (MIGA), the Bank Group’s political risk insurance agency, is also supporting development in South Asia. In Pakistan, MIGA guarantees totaling US$1.74 million supported the establishment of Kashf Microfinance Bank (KMB) to make financial services available to the majority of unbanked population. Over the next five years, KMB will reach 1 million small depositors and 350,000 entrepreneurs through a network of over 100 branches across Pakistan. The network will be supplemented by 300 service posts closer to low income communities.
“As the leading international institution promoting foreign direct investment in emerging and transition economies, MIGA can help investors mitigate risks in these uncertain times and play an important role in helping countries attract FDI,” said Izumi Kobayashi, MIGA’s Executive Vice President. “MIGA can act as a stabilizing influence in the market.”
For more information about the World Bank’s work in South Asia, visit http://www.worldbank.org/sar
For more information about IFC’s work in South Asia, visit http://www.ifc.org/southasia/
For more information about MIGA, visit www.miga.org