The World Bank Group is committed to providing a fast, flexible response to the coronavirus pandemic. We are offering financing, policy advice and technical assistance in every region, across every area from healthcare and education to trade and technology. In this blog series we explore how different teams around the World Bank Group are responding to the challenges ahead.
1. How is your team responding to COVID-19?
My team is involved with IFC’s efforts to keep credit flowing to companies affected by the pandemic. In addition to the significant health-related impact, the economic impacts have been severe. Tourism and retail sectors are being hit especially hard. In some countries, factories are shutting down, which has knock-on effects all the way down their supply chains. As a result, companies’ ability to generate cash from the sale of goods and services has been significantly reduced or halted. IFC has committed $8 billion to the World Bank Group’s COVID-19 response. Of that, $6 billion is being used to channel liquidity to financial institutions, so companies can continue to borrow and have the cash to pay their bills and their employees’ salaries. In addition to the health risks, people’s jobs are on the line when companies cease to operate. There will be further pressures on those who will need our help the most, including people living in conditions of extreme poverty or fragility.
2. What are you doing to mobilize financing quickly?
Today, the world is more interconnected than ever before, with global supply-chain links. When you take into account the knock-on effects of this type of shock, the impact to the global economy will be drastic. Hence, any financial support needs to be deployed on a global scale and we need to do it fast, with as much flexibility as we can as the crisis evolves. We know from experience how much of a challenge this can be. During the 2008 global financial crisis, IFC rapidly deployed the Global Trade Finance Program, which helps banks provide trade financing to companies in distress. We have the track record to do this quickly, while at the same time ensuring projects meet credit, environmental, social governance and compliance standards. To ensure we move as fast as possible, we’re using instruments where our Board has already delegated authority to management to deploy funds.
3. What more can be done? Which partners is IFC working with?
As we speak, we’re combing through our portfolio to assess where the weak spots are. What regions and countries are being hardest hit? What specific sectors and companies are most in need? That’s important work that will inform our efforts. At the same time, we’ve already taken steps to help. In Vietnam, we helped increase trade-finance limits to $294 million for four commercial banks. This helped preserve essential trade and supply-chain relationships, and we hope it will help businesses short on cash stay afloat, especially small-and-medium sized enterprises. We’re keeping in close touch with client banks as the situation evolves, since they’re the vehicles for channeling funds to companies. We’re also coordinating with other Multilateral Development Banks (MDBs), to see if there are ways we can work together to fight the outbreak. At times of global economic slowdown, private investor appetite in emerging markets typically weakens. This is where MDBs play a critical countercyclical role, providing large and coordinated financial packages to shore up emerging markets. The next stage of this will be to crowd in more financial firepower, including from other MDBs.
4. What is IFC’s longer-term approach to preparing for/mitigating such crises?
IFC’s goal is to harness the private sector to create broad-based economic growth and improve the lives of people in developing countries. The more effective we are at helping countries build flourishing private sectors and deep financial markets, the better prepared they’ll be for situations like this. The work we’re doing right now is crucial. COVID-19 is highly disruptive, but if we can contain the economic fallout, countries will be even stronger when the tide turns. We’ll need to continually adapt our response tools, combining flexibility and forward thinking about other issues that could affect our clients, especially those in the poorest countries and fragile situations.
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