World Bank Group increases COVID-19 response to $14 billion
EconomyUlaanbaatar /MONTSAME/ The World Bank and IFC’s Boards of
Directors approved on March 17 an increased $14 billion package of fast-track
financing to assist companies and countries in their efforts to prevent, detect
and respond to the rapid spread of COVID-19. The package will strengthen
national systems for public health preparedness, including for disease
containment, diagnosis, and treatment, and support the private sector.
IFC, a member of the World Bank Group, will increase its
COVID-19 related financing availability to $8 billion as part of the $14
billion package, up from an earlier $6 billion, to support private companies
and their employees hurt by the economic downturn caused by the spread of
COVID-19.
The bulk of the IFC financing will go to client financial
institutions to enable them to continue to offer trade financing, working-capital
support and medium-term financing to private companies struggling with
disruptions in supply chains. IFC’s response will also help existing clients in
economic sectors directly affected by the pandemic--such as tourism and
manufacturing—to continue to pay their bills. The package will also benefit
sectors involved in responding to the pandemic, including healthcare and
related industries, which face increased demand for services, medical equipment
and pharmaceuticals.
“It’s essential that we shorten the time to recovery. This package provides urgent support to
businesses and their workers to reduce the financial and economic impact of the
spread of COVID-19,” said David Malpass, president of the World Bank Group.
“The World Bank Group is committed to a fast, flexible response based on the
needs of developing countries. Support operations are already underway, and the
expanded funding tools approved today will help sustain economies, companies
and jobs.”
The additional $2 billion builds on the announcement of the
original response package on March 3, which included $6 billion in financing by
the World Bank to strengthen health systems and disease surveillance and $6
billion by IFC to help provide a lifeline for micro, small and medium sized
enterprises, which are more vulnerable to economic shocks.
“Not only is this pandemic costing lives, but its impact on
economies and living standards will likely outlive the health emergency phase.
By ensuring our clients sustain their operations during this time, we hope the
private sector in the developing world will be better equipped to help
economies recover more quickly,” said Philippe Le Houérou, Chief Executive
Officer of IFC. “In turn, this will help vulnerable groups to more quickly
recover their livelihoods and continue to invest in the future.”
Having mobilized quickly at the time of the 2008 global
financial crisis and the Western African Ebola virus epidemic, IFC has a
successful track record of implementing response initiatives to address global
and regional crises hampering private-sector activity and economic growth in
developing countries.
The IFC response has four components:
- $2 billion from the Real Sector Crisis Response Facility,
which will support existing clients in the infrastructure, manufacturing,
agriculture and services industries vulnerable to the pandemic. IFC will offer
loans to companies in need, and if necessary, make equity investments. This
instrument will also help companies in the healthcare sector that are seeing an
increase in demand.
- $2 billion from the existing Global Trade Finance Program,
which will cover the payment risks of financial institutions so they can
provide trade financing to companies that import and export goods. IFC expects
this will support small and medium-sized enterprises involved in global supply
chains.
- $2 billion from the Working Capital Solutions program,
which will provide funding to emerging-market banks to extend credit to help
businesses shore up their working capital, the pool of funds that firms use to
pay their bills and compensate workers.
- A new component initiated at the request of clients and
approved on March 17: $2 billion from the Global Trade Liquidity Program, and
the Critical Commodities Finance Program, both of which offer risk-sharing support
to local banks so they can continue to finance companies in emerging markets.
IFC is already working to deploy its response financing.
For example, we recently expanded trade-financing limits for four banks in
Vietnam by $294 million so they could continue lending to companies in need,
especially small and medium-sized enterprises.
IFC will maintain its high standards of accountability, while bearing in mind the need to provide support for companies as quickly as possible. IFC management will approve projects based on credit, environmental and social governance and compliance criteria, as applied in past crisis responses.
Source: World Bank