Business
World Bank May Face Funding Constraints
World Bank president Robert Zoellick warned Friday that the international lender could find money running tight within a year if crisis-driven demands on its funding keep up at their record pace and the richer countries fail to stump up more cash.
Speaking to reporters before the start of annual meetings of the World Bank and International Monetary Fund annual meeting here, Zoellick said the World Bank deployed a record $33 billion in its fiscal year to June 2009 and is already on course to lend a further $40 billion this year.
At present, the World Bank has $100 billion to lend to middle-income countries — the poorest countries get lending from the World Bank by different means and at different rates. If, and when, that money runs dry, the bank may have to resort to rationing.
“By the middle of next year, we will start to face serious constraints,” he said. “We are seeing, as we look into 2011, that we’ll go through that $100 billion and probably beyond.”
He said that the World Bank would be a worthy recipient of funds as it had entered the financial crisis in a well-capitalised position and was implementing reforms to make it more efficient and more self-sufficient, such as increasing the interest rate on loans and increasing the voice of develping countries. The Group of 20 rich and developing countries agreed last week to to increase the share of developing countries in the World Bank by at least 3 percentage points by early next year to 47 per cent.
“I think we have a good case to make,” said Zoellick. “We have the ability for another strong year, but our shareholders, both developed and developing countries, are going to have to calculate how close they want to run us to the edge in terms of being able to support developing countries given an uncertain year in 2010.”
The World Bank seeks to help poor and developing countries with low-interest loans, interest-free credits and grants to pay for investments in education, health care, infrastructure, agriculture and natural resources management.
The pressures on the World Bank have escalated as the financial crisis and the ensuing global recession hit developing countries particularly hard. Prices of commodities such as oil and metals — often their economic mainstay — fell and trade slumped.
Those pressures are evident in the money that the bank is burning through. In the fiscal year to June 2008, it handed out some $13.5 billion — in one week in September 2009 alone, loans totaled just over $7 billion, including a $4.4 billion set of loans to India.
“Payment of tuition fees for undergraduate/postgraduate studies shall be subject to a maximum limit of $25,000.00 per semester,” the Manual states.
The expansion of international card limits also reflects growing confidence among lenders that foreign exchange liquidity has improved enough to support retail dollar transactions.
Speaking recently at the BusinessDay 14th Annual CEO Forum in Lagos, CBN Olayemi Cardoso, governor of the CBN said buying and selling activities now increasingly determine outcomes in the foreign exchange market, unlike in the past when market participants relied heavily on routine Central Bank interventions.
According to Cardoso, Nigeria’s net foreign exchange reserves have risen from just over $3 billion at the start of the reform programme to more than $40 billion, while gross reserves have climbed to about $52 billion, providing stronger confidence for investors and enabling the Central Bank to reserve interventions for periods of market stress rather than day-to-day liquidity management.
The restoration and expansion of international naira card spending limits are increasingly being seen as one of the clearest signs that the benefits of the CBN’s foreign exchange reforms are beginning to reach households, students and businesses making legitimate cross-border payments.
The Secretary-General and Chief Executive Officer, WEC, Dr Angela Wilkinson, disclosed this in a statement, last Thursday.
“Nigeria’s participation comes at a pivotal time as the country seeks to expand energy access, strengthen energy security, accelerate gas development and mobilise the capital required for industrialisation and sustainable economic growth.
“WEC Nigeria will convene leaders from across the energy ecosystem, apply the WEC’s globally recognised Energy Trilemma framework to Nigeria’s unique context, and promote evidence-based dialogue, practical collaboration and informed policymaking.
“It will also ensure that Nigerian and broader African perspectives contribute meaningfully to global energy conversations,” she said.
Wilkinson expressed confidence that Nigeria would play a significant leadership role at the World Energy Congress scheduled for Riyadh in April 2027 and beyond.
The statement also quoted the Chairman of WEC Nigeria, Isa, as describing the country’s participation as an opportunity to deepen national and African leadership within the global energy community through practical solutions tailored to regional development priorities.
He said the platform would promote collaboration across sectors and attract sustainable investments into Nigeria’s energy sector.
The Chief Executive Officer of WEC Nigeria, Wunti, was quoted in the statement as saying that the council would connect leadership, evidence and investment to build a secure, affordable and sustainable energy system.
“This system will be capable of driving economic growth and shared prosperity.”
According to him, the platform will also connect Nigerian institutions and businesses with international knowledge, technology, partnerships and investment opportunities through the World Energy Council’s global network.
Recall that WEC, founded in 1923, is the world’s oldest independent and impartial community of energy leaders and practitioners, advancing informed, collaborative and practical action across the global energy system.
