Bank Announcement to Boost Support for Developing Countries

Press Call with Robert B. Zoellick

11 November 2008

 

I'll start by saying a few words on the upcoming Summit, and then I want to update you on our economic forecasts and brief you on some of The World Bank Group initiatives that we're taking in the face of this spreading crisis.

 

Obviously, the Summit on Saturday won't come up with all the answers, but I hope it will put some good ideas on the table. It will then be very important to have tangible follow-up actions reporting back.

 

It will be important to have a continuing stream of national and group actions, with liquidity in monetary policies, fiscal policies, regulatory fixes, and, importantly, ongoing aid and development support.

 

We're going to see some significant changes over the next two years as we modernize multilateralism in markets. The new multilateral system should be a network of diverse actors that is more attuned to the economic realities of the 21st century. If we're going to build a more inclusive and sustainable and global system, then developing countries must have a say in that process. So, we must all work together in laying the foundations for a better future.

 

It would, therefore, be an error of historic proportions if developed countries put in place policies, structures, and norms that undermined or excluded the interests of developing countries. Many governments in developing countries have taken courageous steps over the last years to put their own houses in order, and this crisis is not of their making.

 

The most important thing on Saturday is that leaders do not lose sight of the need for a "human" rescue. Developed countries must honor their Gleneagles commitments to significantly increase their aid and double aid to Africa. We are some $39 billion a year short of the 2010 Gleneagles targets.

 

The financial crisis comes on the heels of the food and fuel crisis of the recent years. Virtually no country has escaped. All countries, even those with sound policies, are now in a new danger zone. There are growing risks to exports and investment in those industries, credit, banking systems, budgets, and balance of payments. We may have the first decline in trade since 1982 next year, and in many parts of the world, remittances are also drying up. The most vulnerable in society, as always, are the ones most at risk.

 

Our updated economic forecasts reflect this bleak picture; whereas, in June, we were forecasting developing country growth at 6.4 percent for next year, we now see growth at 4.5 percent due to a combination of financial turmoil, slower exports, and weaker commodity prices.

 

We forecast that high-income countries will shrink, that's negative growth, 0.1 percent, and total world GDP growth would be only 1.0 percent. So, in the face of these conditions, we need a global, coordinated, flexible, and fast response to this crisis. While the challenges need to be addressed at the country level, it's more critical than ever that the international community acts in a coordinated and supportive way to make each country's task easier.

 

For its part, the World Bank Group can help with financing, sharing global experience, and problem solving, along with helping mobilizing assistance from others. The World Bank Group will substantially increase its support for developing countries in the following ways:

• IBRD, which makes our basic loans to developing countries, could make new commitments of up to $100 billion over the next three years. This year, lending could almost triple to more than $35 billion, and that's in comparison with $13.5 billion last year.

• We'll also be looking for ways to speed up grants and the long-term interest-free loans that come from the $42 billion that was pledged last year to the International Development Association, which is our fund for the 78 poorest countries.

• And IFC, our private sector arm, is launching or expanding four facilities to help the private sector, and with the contributions of others that we're seeking to mobilize, these could total around $30 billion. And these are designed to help address priority problems that we've identified in the recent weeks.

One in particular is trade finance; the second is recapitalizing the banks in poorer countries, since they don’t have the access to funds that developed countries do; and third, trying to help viable infrastructure projects that are now facing liquidity crises.