Washington, March 20, 2020
The World Bank and the Boards of Directors of the International Financial Corporation (IFC) approved on March 17, 2020 an increased US$14 billion package of fast-track financing to assist companies and countries in their efforts to prevent, detect and respond to the rapid spread of COVID-19.
The package will strengthen national systems for public health preparedness, including for disease containment, diagnosis, and treatment, and support the private sector.
IFC, a member of the World Bank Group, will increase its COVID-19 related financing availability to US$8 billion as part of the US$14 billion package, up from an earlier US$6 billion, to support private companies and employees hurt by the economic downturn caused by the spread of COVID-19.
Trade Finance and Working Capital
The bulk of the IFC financing will go to client financial institutions to enable them to continue to offer trade financing, working-capital support and medium-term financing to private companies struggling with disruptions in supply chains.
IFC’s response will also help existing clients in economic sectors directly affected by the pandemic–such as tourism and manufacturing to continue to pay their bills.
The package will also benefit sectors involved in responding to the pandemic, including healthcare and related industries, which face increased demand for services, medical equipment and pharmaceuticals.
World Bank Group President David Malpass said that it is essential to shorten the time to recovery.
“This package provides urgent support to businesses and their workers to reduce the financial and economic impact of the spread of COVID-19. The World Bank Group is committed to a fast, flexible response based on the needs of developing countries,” he said.
Expanded funding tools
Mr Malpass said that support operations are underway and the expanded funding tools approved today will help sustain economies, companies and jobs.
The additional US$2 billion builds on the announcement of the original response package on March 3, 2020, which included US$6 billion in financing by the World Bank to strengthen health systems and disease surveillance and $6 billion by IFC to help provide a lifeline for micro, small and medium sized enterprises, which are more vulnerable to economic shocks.
IFC Chief Executive Philippe Le Hourerou said that this pandemic is not only costing lives but also impacts on economies and living standards, which is likely to outlive the health emergency phase.
“By ensuring that our clients sustain their operations during this time, we hope that the private sector in the developing world will be better equipped to help economies recover more quickly. In turn, this will help vulnerable groups to more quickly recover their livelihoods and continue to invest in the future,” he said.
Having mobilised quickly at the time of the 2008 global financial crisis and the Western African Ebola virus epidemic, IFC has a successful record of implementing response initiatives to address global and regional crises hampering private-sector activity and economic growth in developing countries.
Four Components
The IFC response has four components
US$2 billion from the Real Sector Crisis Response Facility, which will support existing clients in the infrastructure, manufacturing, agriculture and services industries vulnerable to the pandemic. IFC will offer loans to companies in need, and if necessary, make equity investments. This instrument will also help companies in the healthcare sector that are seeing an increase in demand.
US$2 billion from the existing Global Trade Finance Programme, will cover the payment risks of financial institutions so that they can provide trade financing to companies that import and export goods. IFC expects this will support small and medium-sized enterprises involved in global supply chains.
US$2 billion from the Working Capital Solutions Programme, which will provide funding to emerging-market banks to extend credit to help businesses shore up their working capital, the pool of funds that firms use to pay their bills and compensate workers.
A new component initiated at the request of clients and approved on March 17, 2020: US$2 billion from the Global Trade Liquidity Programme, and the Critical Commodities Finance Programme, both of which offer risk-sharing support to local banks so they can continue to finance companies in emerging markets.
IFC is already working to deploy its response financing. For example, it recently expanded trade-financing limits for four banks in Vietnam by US$294 million so that they could continue lending to companies in need, especially small and medium-sized enterprises.
IFC will maintain its high standards of accountability, while bearing in mind the need to provide support for companies as quickly as possible.
IFC management will approve projects based on credit, environmental and social governance and compliance criteria, as applied in past crisis responses.
Source: The World Bank Group
