World Bank President Ajay Banga told Reuters that the institution is negotiating with 30–40 countries on providing potential crisis assistance to help overcome the effects of energy shocks and rising prices caused by the war in the Middle East, reports UNN.
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According to Banga, the global economy has proved fairly resilient — partly thanks to significant investment in artificial intelligence and adjustments in oil supply and demand. As a result, few countries have sought the initial $25 billion crisis financing package that the World Bank allocated at the start of the war (in February).
However, a sharp increase in diesel and fertilizer prices, as well as other factors — including the possibility of a strong El Niño weather phenomenon — are exacerbating the challenges faced by developing countries. Banga said this ahead of the annual meetings of the International Monetary Fund and the World Bank, which will take place this week.
"There is pressure, so I assume that in the coming months more countries will seek some of that initial $50–60 billion," Banga said, referring to the initial $25 billion plus another $35 billion that countries can access by reallocating resources from already approved World Bank projects.
"We will see, but we are ready. We are actively working on this and negotiating with a number of countries — as I have already said, 30 to 40 countries are in dialogue with us," he added.
Many developing countries have been hit hard by the surge in energy prices and high interest rates, which have increased borrowing costs. This is happening while their budgets are already strained by spending on measures to combat the COVID-19 pandemic and the effects of high inflation caused by Russia's invasion of Ukraine.
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According to World Bank estimates, developing countries will have to repay around $400 billion to external creditors in 2026, with interest payments alone accounting for one-third of that amount.
Banga noted that more countries are showing interest in restructuring existing projects than in using the emergency crisis assistance mechanism to address liquidity problems. According to him, if the situation worsens, the Bank could provide up to $100 billion in financing, exceeding the $70 billion allocated during the pandemic.
Last month, the World Bank announced that it had mobilized a record $112 billion in private capital during the year ending in June (compared with $69 billion the previous year). This figure is more than three times the total amount mobilized in 2022 — the period before Banga, the former CEO of Mastercard, became the bank's president.
This amount supplemented the $123 billion invested from the bank's own resources during the same year, bringing the total to $235 billion. Banga stressed the importance of using all available resources, especially at a time when Western countries have sharply reduced official bilateral assistance for development purposes.
"There is no one-size-fits-all solution to problems of the scale the world is facing. We need to act based on the opportunities available," Banga said.
He expressed hope that private capital flows would continue to grow in the coming years thanks to expanded political risk guarantees provided by the World Bank's Multilateral Investment Guarantee Agency (MIGA), increased local-currency financing, and continued work on regulatory reforms that make it easier for foreign investors to operate.
The greatest increase in private capital mobilization was observed in projects in upper-middle-income countries (such as Argentina and India)—they accounted for $50 billion—as well as in lower-middle-income countries (including Bangladesh and Angola)—$37 billion. At the same time, additional efforts are needed to increase the volume of private capital directed to low-income countries (currently, this figure stands at about $3 billion).
"In smaller countries, this figure has not increased sufficiently; there are certain challenges," he noted, adding that this week the bank would announce new initiatives aimed at ensuring access to private capital for micro-, small and medium-sized enterprises as well. Banga said that growth in private capital volumes had been observed across various regions: the largest increase was recorded in Latin America and the Caribbean ($36.3 billion of last year's total), followed by Europe and Central Asia ($21.3 billion), South Asia ($19.2 billion), and Africa ($22 billion).
According to the Bank, the top 10 recipient countries included Brazil, India, Türkiye, Romania, Nigeria, Argentina, South Africa, Bangladesh, Mexico and Chile.
Banga noted that the World Bank and the IMF were working together to address the problem of high debt levels affecting many developing countries. This work is being carried out as part of a range of initiatives, including those aimed at increasing domestic revenue mobilization in these countries.
The Bank has already implemented debt-for-development financing swaps for Angola and Côte d'Ivoire, and has also provided a portfolio guarantee for Argentina; more than a dozen similar projects are currently in the pipeline.
"We have 14 or 15 projects under development that are helping countries replace old debt with high servicing costs with new debt on more favorable terms, supported by our guarantees," he said, adding that the funds freed up are directed toward financing programs in education, health care, water supply or environmental protection.