A new World Bank Infrastructure Recovery and Assets Platform (INFRA) will provide $45 billion in infrastructure lending over the next 3 years, an increase of $15 billion over the three years preceding the crisis. In addition, IFC, the World Bank Group’s member focused on private sector investments, set-up an Infrastructure Crisis Facility (ICF), which was developed to bridge the gap in available financing for viable, privately-funded or public private partnership infrastructure projects in emerging markets that are facing financial distress as a result of the financial crisis. IFC will contribute up to $300 million in equity with other sources expected to bring in at least $2 billion more to co-finance infrastructure projects. This is likely to help mobilize additional funding worth three times that, covering around $10 billion worth of infrastructure projects.
In the wake of last year’s food crisis, the Bank Group will also increase support to agriculture to boost productivity and production over the next two years to $12 billion, up from $4 billion in 2008. Increases over this two-year period include a near doubling in agricultural support to Africa from $450 million to $800 million, and to Latin America from $250 million to $400 million, while supporting more than $1 billion in new projects in agriculture and rural development in South Asia.
The global financial and economic crisis is expected to severely impact infrastructure services in developing countries, as governments face shrinking resources and declining private financing flows. Capital market financing for developing countries’ infrastructure investments has declined from $200 billion in 2007 to $135 billion in 2008, with a further decline expected this year.
Lessons of previous financial crises point to the need to maintain or expand investments in infrastructure. In financial crises from the 1990s to 2000s, infrastructure sector financing was hit particularly hard. In Latin America and Caribbean crises during the 1990s, some 50 percent of government budget cuts were borne by cuts in public infrastructure spending. During the Asian crisis, Indonesia’s total public investment in infrastructure dropped from about 7 percent of gross domestic product (GDP) in 1995-97 to 2 percent in 2000, and private investment from 2.5 percent of GDP to 0.09 percent during the same period.
INFRA will have a particular focus on green investments and will support governments who want to use infrastructure investments to advance the “green agenda.”
