Emerging funding gap

12 November 2008 By Martin Hutchinson

The multilateral lenders are stepping up lending to developing countries. That fills the gap left by private lenders withdrawal. However it risks directing money primarily to states, infrastructure and social projects and starving the private sector, particularly small business.

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Robert Zoellick, World Bank president, said on November 11 that the World Bank would provide $100bn in loans to developing countries over the next three years, double its projected lending rate. He gave Mexico, Indonesia and Colombia as examples, and also said that the Philippines, Vietnam and subSaharan African countries were on the brink between difficult and desperate conditions. He said it was particularly important that countries maintained social safety nets and infrastructure programmes, recapitalized banks and financed trade. The World Bank will also frontload a $42bn aid package for the poorest countries.

The International Monetary Fund on October 29 created a $100bn rapidaccess short term loan programme for countries facing payments difficulties. Ukraine has already borrowed $16.5bn and Hungary $15.7bn, while Iceland and Pakistan are in advanced negotiations. IMF managing director Dominique StraussKahn said the IMF had the capacity to lend up to $250bn.

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