World Bank official assures Jamaica, others no funding squeeze expected amid war
A SENIOR World Bank official is seeking t o assure Jamaica and other countries that they need not fear being squeezed out of the funding pipeline because of the large amounts of money the multilateral agency has had to be funnelling to the eastern European nation of Ukraine, which has been under bombardment by Russia since February 24.
The bank is said to be operating on multiple tracks to anticipate and respond to the development assistance needs of various countries in different regions of the world.
“As a development bank, we are about development, not just (in) Ukraine. Right now in the crisis, we have the immediate response to Ukraine – there is already almost US$1 billion and then maybe up to another US$3 billion, and it is not just the World Bank,” Dr Mari Pangestu, the World Bank’s managing director of development policy and partnerships, told the Financial Gleaner in an interview.
“What the World Bank has been doing is creating partnerships with the other bilateral donors and development partners.”
She noted that the funding already disbursed and committed to Ukraine and neighbouring countries that are housing Ukrainian refugees has been provided in collaboration with the International Monetary Fund.
“We are focusing on the overall development agenda as well and not forgetting the longer-term development challenges that existed before the war in Ukraine. And when we talk about refugees, it is not just the situation in Poland and Romania. We still have issues in Afghanistan, Syria, and other parts of Latin America,” Pangestu noted.
She asserted, too, that the World Bank is paying attention to the implications of the war in Ukraine on the rest of the world as reflected in escalating prices for fuel and food as well as the corresponding monetary policies being taken by governments and central banks.
“Interest rates are going up, so debt servicing is going higher. There is uncertainty and slower growth,” she said, pointing to the growing need for financing globally.
On the matter of capital adequacy, the World Bank managing director expressed confidence that the multilateral institution has identified and earmarked sufficient resources to meet the financing needs arising from the current and emerging economic shocks.
“At the spring meetings, we announced that we would have what we call search financing for responding to the crisis, as well as addressing the longer-term structural development issues, of US$170 billion for the next 15 months. Part of it will be going to Ukraine, but it will also go to middle-income countries and other countries that are low income,” Pangestu added.
There are opportunities, she said, for the replenishment of funding for various countries, with those countries that qualify for International Development Association (IDA) assistance now going through such a replenishment cycle. The IDA is a World Bank funding platform that provides grants, low and zero-interest loans, and policy advice to 74 of the world’s poorest countries.
Financing is said to be just one of the tools that the World Bank is depending on to respond to growing economic and social development needs of countries. Promoting private investments and macro policies that encourage production, growth, and competitiveness are also said to be part of the institution’s development toolkit.
“A lot of it is about making sure that countries have the right policies and the right frameworks to implement both the response to the food crisis, fuel crisis, slower growth or higher inflation and to understand what are the structural reforms they need to have for growth and for getting investments,” Pangestu argued.
Asked the multilateral’s view on what some economists have described as the inevitability of the current situation of stagflation, or low growth accompanied by rising interest rates, in many countries, leading to another global recession, the institution’s representative said that while recent World Bank data point in that direction, the bank is focused on averting it.
“I think the key is really for countries to ensure that they continue their macro sustainable policies. Jamaica actually gets good marks on that. We have to make sure that in this very kind of constrained world, whatever fiscal space we still have, we use it effectively. If you are going to have subsidies, let’s make it very targeted and specific to the needs. Usually, it is about protecting the vulnerable and protecting certain groups in the society that have been hit very hard by the COVID-19 pandemic, by the climate, or by high food prices,” she suggested.
Attention, she said, should also be placed by governments on improving infrastructure and education as well as putting in place regulatory policies and the general environments that encourage business development and investments.