World Bank sees raising record-breaking funds for poor nations ‘challenging’

THE World Bank faces the “challenging” task of raising a record amount of new money to help the most impoverished nations, according to a top official from the development lender. 

Akihiko Nishio, vice-president of development finance, said a strong US dollar is one key factor, as are the competing funding demands on donors, including aid to support Ukraine, refugees and those affected by higher food prices. 

“We have a good chance of getting there, but it’s challenging,” Nishio said in an interview. “Given the steep appreciation of the US dollar, almost all donor currencies have depreciated,” he said, adding that some European countries will need to increase contributions by around 20 per cent just to maintain inflation-adjusted donation levels.

World Bank president Ajay Banga last year set a goal of raising a record-breaking amount of donations for the International Development Association (IDA), the bank unit that makes low-interest loans and grants to the roughly 75 poorest countries. 

The last high of US$93 billion was raised in the most-recent donor round, which ended in 2021. Nishio said the IDA would need to mobilise at least US$105 billion just to maintain the size of replenishment in real dollar terms.

Banga will likely make an appeal to donors, including top shareholder US, during the bank’s annual meetings next week in Washington. Final donation figures will be announced at an event in Seoul in early December. 

The Washington-based lender highlighted the need for the funds in a report released on Sunday (Oct 13) that showed the poorest economies – those with annual per capita incomes of less than US$1,145 – are worse off today than on the eve of the Covid-19 pandemic.

As well, the world’s 26 poorest economies are “deeper in debt than at any time since 2006”, the fund added in the report.

US Treasury undersecretary Jay Shambaugh said in a speech on Friday that low-income countries are spending about US$60 billion annually to service debt, up from an average of US$20 billion between 2010 and 2020.

SEE ALSO

World Bank says 26 poorest countries in worst financial shape since 2006

Nishio said in the interview that he is seeking to shore up support from nations in the Gulf Cooperation Council (GCC), which includes Saudi Arabia and the United Arab Emirates.

“Some countries are very generous donors, but we would like to see all GCC countries being generous donors,” he said, declining to name specific nations.

Nishio also said that Latin American countries Brazil, Colombia and Chile should be more involved as donors. He added that Brazil is “seriously considering” coming back as an IDA donor since its last pledge almost a decade ago.