The World Bank and IFC’s Boards of Directors approved today an increased $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 $8 billion as part of the $14 billion package,
up from an earlier $6 billion, to support private companies and their
employees hurt by the economic downturn caused by the spread of
COVID-19.
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.
“It’s essential that we 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,” said David Malpass, president of the World Bank Group. “The
World Bank Group is committed to a fast, flexible response based on the
needs of developing countries. Support operations are already underway,
and the expanded funding tools approved today will help sustain
economies, companies and jobs.”
The additional $2 billion builds on the announcement of the original response package on March 3, which included $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.
“Not only is this pandemic costing lives, but its impact on economies and living standards will likely outlive the health emergency phase. By ensuring our clients sustain their operations during this time, we hope the private sector in the developing world will be better equipped to help economies recover more quickly,” said Philippe Le Houérou, Chief Executive Officer of IFC. “In turn, this will help vulnerable groups to more quickly recover their livelihoods and continue to invest in the future.”
Having mobilized quickly at the time of the 2008 global financial crisis and the Western African Ebola virus epidemic, IFC has a successful track record of implementing response initiatives to address global and regional crises hampering private-sector activity and economic growth in developing countries.
The IFC response has four components:
- $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.
- $2 billion from the existing Global Trade Finance Program, which will cover the payment risks of financial institutions so 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.
- $2 billion from the Working Capital Solutions program, 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: $2 billion from the Global Trade Liquidity Program, and the Critical Commodities Finance Program, 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, we recently expanded
trade-financing limits for four banks in Vietnam by $294 million so
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.
