It’s no secret that the global economy is going through tough times – recession, unemployment and war. To provide some relief, World Bank has agreed to establish crisis facility for poor and war-ridden countries. The agreement is given for the recommendation by International Development Association (IDA). Sweden has played a pivotal role in this venture.
The surge in energy and food prices, along with rising inflation due to Russia’s invasion of Ukraine, has disproportionately affected the poorest and most vulnerable populations. This situation is worsening the already significant challenges caused by COVID-19 and climate change, particularly in Africa and the Middle East.
To mitigate these impacts, the Crisis Facility aims to provide financial assistance to countries, enabling them to respond to food insecurity, cope with economic shocks, manage more frequent and severe natural disasters, and effectively address health emergencies and outbreaks of severe diseases.
The Crisis Facility has been established to provide increased support to the world’s most impoverished nations in tackling growing development challenges caused by multiple global crises, such as food insecurity and extreme climate events. This facility is also a funding program aimed at assisting Ukraine, Moldova, and the countries most affected by the war in Ukraine.
The Swedish Government has taken on a prominent role from the beginning, as Minister for International Development Cooperation and Foreign Trade Johan Forssell announced a contribution of SEK 600 million to Ukraine and Moldova in December 2022.
Sweden, serving as the President of the Council of the European Union, has played a crucial role at the national level in rallying support for those impacted by the conflict in Ukraine. The Swedish government expresses its appreciation for the Crisis Facility, which serves as a commendable model of effective aid. While negotiations have been protracted and occasionally challenging, it is satisfying to note that donor governments have finally reached a consensus.
The immediate future looks exceedingly difficult for the poorest nations, as there is a heightened need for resources. The International Development Association (IDA) is collaborating with donor governments and utilizing its leveraging capacity to gather additional funding for the Crisis Facility, enabling countries to address their heightened vulnerabilities.
For the current IDA20 cycle, spanning from July 2022 to June 2025, approximately two-thirds of the resources designated for the crisis response window have been allocated within the first year. To support the remaining two years, the Crisis Facility will provide additional funding.
In line with the principle of global solidarity, the Crisis Facility aims to complement the ongoing endeavors of both multilateral and bilateral partners in financing the reconstruction and recovery efforts in Ukraine. It will specifically address the far-reaching social and economic consequences of the invasion on both Ukraine and neighboring Moldova, which is currently accommodating Ukrainian refugees.
World Bank has agreed to establish Crisis Facility for poor and war-ridden countries. Utilizing the leveraging potential of IDA’s balance sheet, the Crisis Facility will maximize the impact of each dollar invested. Donors are expected to announce their contributions by December 2023, at which point the Crisis Facility envelope will be disclosed.
Source: World Bank Press Release