IMF, World Bank & IFI Round-Up

The World Bank is boosting its financial support of developing countries reeling from the global financial crisis with an extra USD 100 billion over the next three years. The new commitments “could almost triple” the bank’s [IBRD] lending to more than USD 35 billion in the fiscal 2008-2009 year that ends June 30, up from the USD 13.5 billion in the prior year, the bank said. “This increase in financial support will protect the poorest and most vulnerable from harm, support countries facing big budget shortfalls, and help sustain long-term investments upon which recovery and long-term development will depend,” the World Bank said.

Venezuela and Russia agreed to form a USD 4 billion joint bank to pay for development projects, along with 14 other agreements between the oil-exporting countries. Officials from Gazprombank and state energy company Petroleos de Venezuela signed a memorandum of understanding between the two countries yesterday in Caracas, in a ceremony on state television attended by President Hugo Chavez and Russian Deputy PM Igor Sechin, Bloomberg reported. Venezuela is seeking new funding sources as bonds and bank loans become more difficult to arrange amid a lack of buyers for emerging market debt. It formed a USD 12 billion development fund largely with Chinese loans that are being repaid in oil.

Fears about the outlook for emerging markets were heightened this week when four countries had their credit ratings downgraded because of the threat of global recession and the drying up of capital flows, the Financial Times (UK) reported. The downgrades of Bulgaria, Hungary, Kazakhstan and Romania illustrated the continuing dangers facing these economies, the ratings agency Fitch Ratings said.

The World Bank issued a bond that funds projects aimed at reducing climate change and helping people affected by it, an example of how institutions are using the capital markets to fund green initiatives. The “World Bank green bond” was sold through Sweden’s Skandinaviska Enskilda Banken Money raised from the deal will be spent to stimulate and coordinate public- and private-sector projects to tackle the threat of global warming. All proceeds to the World Bank will be used to finance projects, such as wind farms and solar parks, which cut carbon dioxide emissions in the developing world.

The multilateral Global Fund said Nov. 10 that it has approved USD 2.75 billion in fresh grants over two years to fight AIDS, tuberculosis and malaria. With the latest injection, total grants approved by the Geneva-based fund have increased to USD 14.4 billion in 140 countries, the body said. “This is the highest amount of new financing approved by the Global Fund ever,” Rajat Gupta, Chairman of the fund’s board said in a statement issued at the end of a two-day board meeting in New Delhi.

EU leaders pushed for tighter world financial regulation as the credit crisis hammers the global economy, throwing down the gauntlet to President-elect Barack Obama. The EU sought more powers for the IMF, called for stiffer regulation of credit-rating agencies and hedge funds, and urged a crackdown on risk-taking and bankers’ pay, Bloomberg reported. “We don’t want to move from an absence of regulation to too much regulation, but we want to change the rules of the game,” French President Nicolas Sarkozy said after EU leaders finalized proposals for next week’s global summit in Washington.

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