New facility to speed $2 billion to help poorest countries deal with effects of the financial crisis
Money to be used for safety nets, infrastructure, education and health
Facility will expedite approval process, frontload money from the $42 billion IDA fund for the 78 poorest countries
December 10, 2008—The World Bank Group will speed funds to the world’s poorest countries to help them cope with falling revenues, investment and trade in the wake of the global financial crisis.
An initial $2 billion will be available to the hardest-hit countries to finance expenditures needed to maintain economic stability and sustain growth, address volatility, and protect the poor.
The money is likely to support public spending on infrastructure, education, health, and social safety net programs, such as school and maternal feeding programs.
“We want to help countries manage this downturn with financing to help minimize its impacts and by assisting them in designing supportive policies,” says World Bank Group President Robert B. Zoellick.
What Is IDA?
The International Development Association (IDA) provides interest-free credits and grants for programs that boost economic growth, reduce inequalities and improve people’s living conditions. It is one of the largest sources of assistance for the world’s 78 poorest countries, 39 of which are in Africa, and is the single largest source of donor funds for basic social services in the poorest countries. More
The Bank Group is creating a financial crisis facility to fast-track funds to developing countries. The new facility will expedite approval processes for money from a $42 billion fund, known as IDA 15, for 78 of the world’s poorest countries.
The Bank created a similar facility in May to speed support to countries hit hard by high food and fuel prices. The Bank estimates 100 million people have been driven into poverty in 2008 by the food crisis.
Zoellick warns that more people could slip into poverty as the financial crisis spreads around the globe.
“We estimate that a 1 percent decline in developing country growth rates will trap 20 million more people in poverty.”
The World Bank’s just-released Global Economic Prospects report projects developing country economic growth will slow from 7.9 percent in 2007 to 4.5 percent in 2009. Growth had previously been projected stay strong at 6.5 percent in 2009.
Many developing countries could also see declines in bilateral aid, making economies that were already fragile less able to cope.
Countries will be eligible for rapid assistance following an in-depth assessment of the impact of the financial crisis and financing needed to address it, as well as the government’s planned policy response.
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