Requests for World Bank loans at unprecedented levels

12 Apr 16

Demand for World Bank cash has risen to unprecedented levels outside of a financial crisis as developing countries struggle with a sluggish global economy.

The bank said lending is on track to reach more than $150bn since 2013, with loans from its International Bank for Reconstruction and Development, an arm of the bank which lends to middle-income countries, this year set to eclipse previous records.

Jan Walliser, vice president for equitable growth, finance and institutions at the World Bank, said developing country governments “are feeling the pressure to find additional ways to accelerate growth in the current downturn”.

Many that rely on commodity exports have been particularly hard hit by tumbling prices, while all are impacted by the slowdown in China and weaker than expected global recovery.

Africa’s two largest oil exporters for example, Nigeria and Angola, have seen their economies sent into a tail spin as oil prices collapsed.

World Bank president Jim Yong Kim said in an economy where growth is expected to remain weak, it is critically important the bank keep playing its traditional role of helping developing countries accelerate growth.

IBRD loans are expected to rise above $25bn this year – substantially lower than their peak of $44bn during the financial crisis, but still $10bn higher than the pre-crisis average.

The bank said demand for support from the International Development Association, its arm dedicated to lending to the poorest countries, is also expected to reach pre-crisis levels.

Demand for non-lending advisory services, which help clients implement important policy changes, is also higher than ever, the bank said.

Walliser pointed out that a broad set of legal, regulatory, institutional and logistical reforms that make investment more attractive will be integral in improving long-term growth trends.

Another large portion of current spending takes the form of development policy financing, which backs the implementation of crucial resources to diversify countries’ economies and build buffers against future shocks.

“These types of loans are important because the bank is signalling to financial markets that a country’s reforms are technically solid, the country will follow through on these commitments, and the reforms will not hurt the poor and vulnerable,” Kim said.

They are also “highly complementary” to International Monetary Fund stabilisation programmes, he added.

Other global risks – including climate change, conflict, and pandemics – are likely to further impact World Bank demand.

Kim stressed: “It is now exceedingly clear that we will never end extreme poverty and boost shared prosperity if we don’t tackle global threats in partnership with our member countries – one region, one country and one person at a time.”

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