September 17, 2008 – The World Bank Group extended loans, credits, grants, equity investments, and guarantees totaling over US$5.5 billion to South Asia in fiscal year 2008. The funding supports 79 new projects designed to overcome poverty and boost growth through practical plans enhancing the business and investment environment and empowering poor people.
Contributing to this strong support was: US$1.491 billion from the International Bank for Reconstruction and Development (IBRD), which provides financing, risk management products and other financial services; US$2.756 billion from the International Development Association (IDA), which provides interest-free loans and grants; US$1.26 billion from the International Finance Corporation (IFC), which makes equity investments and provides loans, guarantees, and advisory services to private-sector business in developing countries; and US$36.6 million from the Multilateral Investment Guarantee Investment Agency (MIGA), the group’s political risk insurance agency.
Food and Fuel Crisis
“Last year posed profound economic, political and social challenges for countries in South Asia and the world,” said Isabel M. Guerrero, World Bank Vice President for South Asia. “The increase in world fuel and food prices, especially for rice and wheat, the two main staples in South Asia, has had a dramatic impact on poor people. As demonstrated by our large funding program in the last fiscal year, we remain deeply committed to helping the countries in the region overcome these urgent challenges. At the same time, I am heartened to see that strong growth continues to bring tangible results in the fight against poverty.”
Globally, the World Bank Group committed US$38.2 billion in fiscal year 2008, up 11 percent from fiscal year 2007. An important contribution during the fiscal year was the Bank Group’s response to the food price crisis. It created a US$1.2 billion rapid financing facility with the first grants approved in FY08. More funds have subsequently been approved in the current financial year, including a US$8 million grant for Afghanistan, which supports the rehabilitation of around 500 small, traditional irrigation schemes which are critical to the recovery of the country’s agriculture sector.
“In a year that saw rising food and fuel prices become the harsh new reality, the $38.2 billion provided by the World Bank Group to developing countries helps create development solutions so people can have the opportunity and means to improve their lives,” said World Bank Group President Robert B. Zoellick.
Projects to Overcome Poverty
India was the largest borrower from IBRD and IDA, accounting for US$2.154 billion, or nearly 10 percent of total lending from these two institutions. Within South Asia, Bangladesh was the second largest borrower with US$753 million (IDA), followed by Pakistan at US$545 million (IDA/IBRD), and Nepal at US$380 million (IDA).Many of the Bank’s projects in the last fiscal year supported existing programs that are delivering results. For instance, in Nepal the Bank approved a US$100 million grant for to the second phase of the Poverty Alleviation Fund, which has reached more than 900,000 rural Nepalese in 25 districts. It also extended additional financing of US$75 million to the Pakistan Poverty Alleviation Fund, which has touched the lives of more than 2.5 million people in about 5,000 villages.
Looking ahead in South Asia, the Bank will focus on cross-cutting reforms such as governance and fiscal management, and continue addressing deficiencies in the region’s investment climate, such as weak infrastructure, red tape, and corruption. It will also deepen its engagement in states where poverty is increasingly concentrated, such as Orissa and Bihar in India and Sindh in Pakistan.
IBRD lending in the past year focused on helping South Asia close its infrastructure gap, often cited as the greatest constraint to foreign investment. To help address the problem, the Bank provided a US$400 million loan for the Rampur Hydropower Project in the state of Himachal Pradesh that will provide renewable, low-carbon energy to India’s overstretched northern electricity grid. It also extended a US$600 million loan to the Power Grid Corporation of India, backed by a guarantee from the Government of India, designed to increase reliable power exchange between states.
IFC & MIGA in South Asia
IFC’s investment commitments in the South Asia region were US$1.26 billion for 37 projects in FY08, and it mobilized an additional US$28 million through structured and secure ties products. This year IFC enhanced its portfolio in the infrastructure sector, from 22 percent to 30 percent for South Asia as a whole. Investments ranged from power generation to natural gas, and from port services to a fund for developing public-private projects in the infrastructure sector. The manufacturing sector’s share is 21 percent and the financial sector is 20 percent.
Paolo M. Martelli, Regional Director for IFC South Asia, said: “IFC’s growing focus in the region in infrastructure and financially underserved markets and its efforts towards boosting rural growth and supporting reform are important steps in the larger goal of inclusive development.” IFC reaffirmed its commitment to contribute to the South Asia region’s economic growth by expanding its investments in private enterprises in the sectors where IFC is needed most. In the financial year ending June 30, 2008, private sector projects worth US$2.6 billion were supported as a result of IFC’s assistance to Bangladesh, Bhutan, India, Maldives, Nepal, and Sri Lanka.
Also active in the region is MIGA, which provided US$36.6 million in political risk insurance or guarantees in support of three projects in the region. Two of the projects were in Afghanistan—a priority for MIGA as a conflict-affected country—including a for-profit, national, and fully regulated microfinance bank that will provide financing and savings instruments to micro-enterprises in Afghanistan The MIGA-supported project—BRAC Afghanistan Bank—is expected to lower the costs of loans for smaller businesses and help expand economic opportunity for low-income populations in the country.
“Foreign direct investors can play a critical role in reducing poverty—by building roads, providing clean water and electricity, and above all, providing jobs,” said James Bond, MIGA’s Acting Executive Vice President. “We are committed to promoting socially, economically, and environmentally sustainable projects in the region to help address constraints in education, health services, financial sector development, and infrastructure.”
Additional Resources
- Afghanistan: Achieving Results in a Difficult Environment Building an effective state that can provide security and services to the people is at the heart of the reconstruction effort in Afghanistan. (Read More »)
- Afghanistan: National Solidarity Program At Work The National Solidarity Program (NSP), a community-led reconstruction and rural infrastructure initiative, has made significant achievements. (Read More »)
- Bangladesh: Nuton Jibon - New Life after Cyclone Sidr So far, over 1,000 villages across the country have benefited from this community-driven program, which has provided critical village infrastructure in rural areas. (Read More »)
- Rebuilding Sri Lanka's Southern Coastal Road The Tsunami of 2004 damaged approximately 1,200 kms of roads along coastal Southern Sri Lanka. (Read More »)
- South Asia: Development Data A wide range of social and economic measures on South Asia, including links to the World Bank's most important online development databases. (Read More »)
- South Asia: Analysis and Research Compilation of all the World Bank's publications on South Asia, with 'search' options and links to analysis and research on other South Asian countries. (Read More »)
- World Bank Program in South Asia Launching pad to all information on World Bank activities in Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka.(Read More »)
RSS