Demand for WB Group Support Tops US$72 Bln

The World Bank Group committed more than US$72 billion in fiscal year 2010, an unprecedented level of Bank Group assistance for developing countries as the world faces a fragile and uneven recovery.

In FY10 (July 1, 2009 – June 30, 2010), the Bank Group supported an estimated 875 projects to promote economic growth, overcome poverty, and promote private enterprise, with record commitments in education, health, nutrition, population, and infrastructure providing much-needed investments in crisis-hit economies.

This assistance was provided in loans, grants, equity investments and guarantees to help countries and private businesses contending with significantly diminished private capital flows in the wake of the global downturn. Private flows are forecast to recover only modestly from US$454 billion in 2009 to US$771 billion by 2012, still far below the US$1.2 trillion in 2007. Overall, the financing gap of developing countries is projected to be US$210 billion in 2010, declining to US$180 billion in 2011 -- down from an estimated US$352 billion in 2009.

"Our developing country partners needed the Bank to be fast, flexible, and innovative in the face of the global economic crisis, and I'm very pleased we were able to respond with record levels of assistance," said World Bank Group President Robert B. Zoellick. "The harmful effects of the crisis on the poorest will be felt long after the global economy rebounds, and I believe it is critical that we are able to provide such strong support for social safety nets, infrastructure, and the private sector, in order to protect the poor and lay the foundation for recovery and growth."

Commitments from the International Bank for Reconstruction and Development (IBRD) --which provides financing, risk management products, and other financial services to countries -- hit an unprecedented US$44.2 billion, up sharply from the previous record of US$32.9 billion in FY09. Fast-disbursing Development Policy Loans, providing critical balance-of-payments support amid financing gaps, comprised nearly 47 percent of the overall total for FY10. Disbursements for Development Policy Loans kept pace with commitments approved, disbursing 85 percent of operations approved since July 2008 (excluding deferred drawdown operations).

Commitments from the International Development Association (IDA), which provides interest-free loans and grants to the world's 79 poorest countries, rose to a new record high of US$14.5 billion in FY10, from US$14 billion in FY09.

World Bank (IBRD and IDA) commitments for social protection -- including safety net programs for the poorest and most vulnerable -- are estimated to reach at least US$3.6 billion in FY10. Financing for infrastructure, a critical sector for job creation and future productivity, surpassed FY09's US$18 billion, and is estimated to reach more than US$22 billion in FY10. FY10 also saw education commitments at an all-time high of around US$4 billion, up from US$3.4 billion in FY09; and record support for health, nutrition and population, which is estimated at US$4 billion, up significantly from US$2.9 billion last year. As the institution made these unprecedented commitments, with total FY09/10 Bank Group commitments at over US$130 billion, the IBRD faced capital constraints, and shareholders agreed in April 2010 to the first major capital increase in 20 years.

Disbursements from IBRD and IDA -- an important measure of impact on the ground -- also reached record levels, and are expected to be around US$40 billion, up from US$28 billion in FY09, due to concerted and sustained efforts by Bank Management and staff to respond more quickly to client demand.

IFC, the largest provider of multilateral financing for the private sector in developing countries, provided a record amount of financing to businesses in developing countries, strengthening their ability to cope with uncertain global economic conditions. Preliminary and unaudited data as of June 29 indicated IFC investments totaled almost US$18 billion, marking an increase from US$14.5 billion in FY09. That included an estimated US$12 billion in commitments made on IFC's own account and more than US$5 billion mobilized from other investors to supplement IFC financing. Resources mobilized from other investors included US$235.8 million raised by IFC Asset Management Company (AMC), a wholly owned subsidiary of IFC that acts as an independent manager of third-party capital. The number of IFC investment projects rose to more than 500 as of June 29, an increase of about 12 percent over FY09. Expenditures by IFC Advisory Services are expected to reach about US$300 million.

IFC also maintained its strategic focus on the poorest countries and regions -- especially sub-Saharan Africa, where IFC investments climbed to slightly over US$2 billion as of June 29, a record. IFC investments in the 79 countries eligible to borrow from IDA totaled more than US$4 billion. Nearly half of all IFC projects, and about 60 percent of Advisory Services project expenditures, were in these countries.

"In an unpredictable economic landscape, IFC directed significant financial resources into regions of the world where we could do the most good," said Lars Thunell, IFC's EVP and CEO. "We mobilized capital to address the major development challenges of our time. We leveraged our global expertise, developing innovative products and services to help our clients succeed. We catalyzed investment in emerging markets, demonstrating to investors that development and commercial success can go hand in hand in these markets."

IFC's achievements included several groundbreaking transactions and projects designed to create opportunity for people in the poorest countries and protect them from economic uncertainties. The IFC Capitalization Fund and the IFC African, Latin American, and Caribbean Fund -- both managed by AMC -- invested about US$175 million in Africa's Ecobank, which has the largest geographical presence in the region, to help expand access to credit in the poorest countries. IFC also invested US$20 million in Leapfrog Financial Inclusion Fund, the world's first commercial microinsurance fund. The fund is expected to help 25 million people in Africa obtain insurance.

The Bank Group's political risk insurance agency, the Multilateral Investment Guarantee Agency (MIGA) issued US$1.5 billion in guarantees, up from US$1.4 billion in FY09. "Despite subdued investor confidence and reduced FDI flows this year, MIGA continued to support investments that create jobs, provide basic infrastructure, and offer lending services to the real economy," said MIGA's Executive Vice President, Izumi Kobayashi. "We have stepped up to assist recovery and growth in developing countries during undeniably challenging times."

Commitments from the World Bank Group to sub-Saharan African countries -- the Bank's top priority -- rose to US$13.85 billion in FY10, up 28 percent from US$9.9 billion in FY09. This included US$7.2 billion from IDA, or 49 percent of total IDA commitments; US$4.3 billion from IBRD; a record US$2 billion from IFC; and US$345 million in MIGA guarantees for projects in the region. IBRD and IDA disbursements in sub-Saharan African countries stood at US$6 billion in FY10.

Despite the severity of the global crisis, the downturn did not result in an emerging market sovereign debt crisis of the type seen in the 1990s and 2000s, thanks mainly to prudent macro-economic management and debt management on the part of developing countries. In addition to financial commitments, the Bank assisted governments and sub-national entities in reducing their vulnerability to market volatility through technical assistance and by making risk management tools available to them. In FY10, the volume of risk management transactions executed by the Bank increased more than threefold compared to pre-crisis levels as member countries sought to more actively manage the risk on their debt portfolios.

(China Development Gateway July 3, 2010)