Key facts
- The World Bank is in discussions with 30 to 40 countries about potential crisis aid.
- President Ajay Banga said the bank has made $25 billion in crisis funds available.
- Banga expects more countries to seek aid in the coming months, potentially tapping $50 billion to $60 billion.
- Developing countries owe external creditors about $400 billion in 2026.
- The World Bank attracted a record $112 billion in private capital in the year ended June.
- The bank disbursed $123 billion from its own resources in the same period.
The World Bank is engaged in discussions with 30 to 40 countries regarding potential crisis aid to help them navigate energy shocks and price increases, according to its president, Ajay Banga. He told Reuters that while initial crisis funds have seen limited uptake, factors such as a sharp spike in diesel and fertilizer prices, high interest rates, and the looming El Niño weather phenomenon are intensifying challenges for developing nations.
Banga indicated that more countries may seek assistance in the coming months, potentially tapping into a total of $50 billion to $60 billion, which includes the initial $25 billion and an additional $35 billion available by diverting resources from existing World Bank projects. He noted that many developing countries are struggling with depleted fiscal reserves from the COVID-19 pandemic and the inflationary pressures following Russia's invasion of Ukraine.
World Bank estimates show that developing countries collectively owe external creditors approximately $400 billion by 2026, with interest payments constituting one-third of that sum. Banga highlighted that more countries have expressed interest in retooling existing projects to address liquidity needs rather than utilizing the immediate crisis window. He added that the bank could mobilize up to $100 billion in funds if the situation deteriorates, surpassing the $70 billion disbursed during the pandemic.
Banga also reported a significant increase in private capital flows, reaching a record $112 billion in the year ending June, compared to $69 billion the previous year. This was in addition to $123 billion invested from the bank's own resources, totaling $235 billion. He emphasized the importance of leveraging all available resources, especially as Western countries have reduced official bilateral development aid. Banga anticipates further growth in private capital, supported by expanded political risk guarantees, increased local currency financing, and regulatory reforms.
The largest increases in private capital were observed in upper-middle-income countries like Argentina and India ($50 billion), and lower-middle-income countries such as Bangladesh and Angola ($37 billion). However, efforts are ongoing to boost the roughly $3 billion in private capital directed towards low-income countries. Banga mentioned that the bank would introduce new initiatives to ensure micro-, small-, and medium-sized businesses also gain access to private capital.
Regionally, Latin America and the Caribbean saw the largest increase in private capital ($36.3 billion), followed by Europe and Central Asia ($21.3 billion), South Asia ($19.2 billion), and Africa ($22 billion). The top 10 recipient countries included Brazil, India, Turkey, Romania, Nigeria, Argentina, South Africa, Bangladesh, Mexico, and Chile.
Banga stated that the World Bank and the International Monetary Fund are collaborating to address high debt levels in developing countries through various initiatives, including efforts to enhance domestic revenue collection. The bank has already facilitated debt-for-development swaps for Angola and Ivory Coast and a portfolio-based guarantee for Argentina, with over a dozen more projects in development.