Hannfried von Hindenburg
WASHINGTON, April 23, 2009—The World Bank will increase infrastructure investments to $45 billion over the next three years to provide the foundation for rapid recovery from the global economic crisis, World Bank Group President Robert B. Zoellick announced today at the World Bank/IMF Spring Meetings. In the wake of last year’s food crisis, the Bank Group is also boosting support for agriculture from $4 billion in 2008 to $12 billion over the next two years to help ensure vital food security.
“Investments in infrastructure can provide the platform for job creation, sustainable economic growth and overcoming poverty, and help jump start a recovery from the crisis,” said Zoellick. “The Latin American and Asian crisis showed how countries can suffer from a decline in infrastructure, leaving a weaker foundation for long-term economic growth that hits the poorest the hardest. Infrastructure is also crucial to supporting agriculture. Without good infrastructure a lot of agricultural production can go to waste.”
A new World Bank Infrastructure Recovery and Assets Platform (INFRA) will provide $45 billion in infrastructure lending over the next 3 years, an increase of $15 billion over the three years preceding the crisis. In addition, IFC, the World Bank Group’s member focused on private sector investments, set-up an Infrastructure Crisis Facility (ICF), which was developed to bridge the gap in available financing for viable, privately-funded or public private partnership infrastructure projects in emerging markets that are facing financial distress as a result of the financial crisis. IFC will contribute up to $300 million in equity with other sources expected to bring in at least $2 billion more to co-finance infrastructure projects. This is likely to help mobilize additional funding worth three times that, covering around $10 billion worth of infrastructure projects.
In the wake of last year’s food crisis, the Bank Group will also increase support to agriculture to boost productivity and production over the next two years to $12 billion, up from $4 billion in 2008. Increases over this two-year period include a near doubling in agricultural support to Africa from $450 million to $800 million, and to Latin America from $250 million to $400 million, while supporting more than $1 billion in new projects in agriculture and rural development in South Asia.
The global financial and economic crisis is expected to severely impact infrastructure services in developing countries, as governments face shrinking resources and declining private financing flows. Capital market financing for developing countries’ infrastructure investments has declined from $200 billion in 2007 to $135 billion in 2008, with a further decline expected this year.
Lessons of previous financial crises point to the need to maintain or expand investments in infrastructure. In financial crises from the 1990s to 2000s, infrastructure sector financing was hit particularly hard. In Latin America and Caribbean crises during the 1990s, some 50 percent of government budget cuts were borne by cuts in public infrastructure spending. During the Asian crisis, Indonesia’s total public investment in infrastructure dropped from about 7 percent of gross domestic product (GDP) in 1995-97 to 2 percent in 2000, and private investment from 2.5 percent of GDP to 0.09 percent during the same period.
INFRA will have a particular focus on green investments and will support governments who want to use infrastructure investments to advance the “green agenda.”
Background on the World Bank’s crisis response
The World Bank Group’s operational crisis response initiatives focus on three thematic areas: protect the most vulnerable against the fallout of the crisis; maintain long-term infrastructure investment programs; and sustain the potential for private sector-led economic growth and employment creation, particularly through small and medium-sized enterprises and microfinance. The thematic areas are being addressed through three operational platforms – the Vulnerability Financing Facility (VFF), the Infrastructure Recovery and Assets platform (INFRA), and the IFC-led private sector platform, respectively. This approach draws on lessons learned in dealing with past crises. The three priority themes are inter-related and span the core development mandate of the World Bank Group.
For more information on the World Bank please visit www.worldbank.org. For more information about IFC’s crisis response, visit www.ifc.org/crisisresponse.