First two countries to benefit from the Bank’s new $2 billion fund to speed assistance to countries in need
Financial crisis taking a heavy toll on the poor in these countries
Countries to use the funds to create jobs, upgrade infrastructure, import basic goods, pay salaries and bills
March 2, 2009—Armenia had a strong growth record and rapidly falling poverty rates before the global economic crisis hit.
Now, as growth falls and unemployment rises, the country is getting $35 million in expedited funding to create some 280,000 job days of employment in rural areas.
Armenia is one of the first two countries to benefit from a new $2 billion fund created by the World Bank last December to speed assistance to developing countries trying to cope with the financial crisis.
A $100 million grant was also approved for Democratic Republic of Congo last week.
"We’re already seeing the financial crisis taking a heavy toll on the poor in these countries," says World Bank Managing Director Ngozi Okonjo-Iweala.
"It’s poor people who will be hit hardest by this crisis, and that only serves to highlight the obvious need to speed up assistance to help those who’ve lost their jobs or face uncertain times."
$2 Billion Facility Part of Multi-Pronged Strategy
The World Bank created the Financial Crisis Response Fast Track Facility to accelerate delivery of $2 billion in grants and long-term, interest-free loans from the Bank’s $42 billion fund for the world’s poorest countries, known as IDA.
The new facility is part of the World Bank Group’s multi-pronged strategy to speed assistance to developing countries as the financial crisis deepens around the world. The Bank projects the crisis could trap another 53 million people in poverty.
Other initiatives include recapitalizing banks, financing trade and infrastructure, assisting microfinance institutions, and a proposed Vulnerability Fund derived from less than 1 percent of developed country stimulus packages to fast-track funds to various organizations helping the poor.
External Shocks Affect Armenia
Before the crisis hit, Armenia was reaping the benefit of steady reforms. Its 13 percent economic growth rate over the past decade helped reduce the proportion of the population in poverty from 55 percent to 26 percent. It was named a top business reformer in 2007 Doing Business report. The country’s financial system was and is still well capitalized.
But now exports, foreign investment, remittances and growth are falling. Mines have closed and unemployment is rising. Economic growth will likely fall below zero in 2009 and poverty and vulnerability are likely to increase.
"The $35 million in fast-track funds will provide immediate employment opportunities," says Asad Alam, regional director of the Bank’s South Caucasus department, "but they will also help upgrade the infrastructure needed to foster medium-term growth."
The funding will help upgrade 100 km of rural roads and other infrastructure, and support community-focused economic development, particularly in hard-hit rural areas.
Part of the funding will go toward the Armenian Social Investment Fund, which has financed more than 600 micro-infrastructure projects and help raise living standards in rural areas.
DRC Also Hit by Falling Commodity Prices
The $100 million emergency grant for the Democratic Republic of Congo was prepared in only two months. As much as 50 percent of ithe money will be disbursed a month after the project launches, says Franck Bousquet, who oversees the project at the World Bank.
The grant will help finance short-term costs of importing essential goods and commodities, pay teachers’ salaries and state water and electricity bills.
“It’s important for the World Bank and the other partners to support the DRC in this period of turmoil,” says Marie Francoise Marie-Kelly, country manager for DRC and Congo-Brazzaville.
Like Armenia, DRC is suffering job losses as mines close or lay off workers amid falling demand for copper and other minerals it exports. Planned investments in infrastructure are also threatened by falling export revenues even as the country grapples with continued conflict at its eastern borders, according to the Bank’s Africa Can blog.
“The financial crisis aside, DRC is facing a huge humanitarian and security crisis in the east brought on by armed conflict. These two crises are expected to have a considerable impact not only on the government’s fiscal position (lower revenue and higher security spending), but also on social sectors due to the mass movement of people,” DRC-based World Bank economist Emilie A. Mushobekwa wrote in December.
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