The Bank’s response reflects increasing concern that the current economic climate is pushing more people in the developing world into poverty, facing hunger and likely cut-backs in health, education, and other social programs.
“A world that doesn’t learn from history is condemned to repeat it. While the recent G-20 meeting focused on financial issues, we need to learn from the history of past crises, when governments squeezed for cash, cut into social programs with often devastating impacts on the poor,” World Bank Group President Robert B. Zoellick said.
“Most attention in the current crisis has been focused on developed countries where people face the loss of homes, assets and jobs. These are real hardships,” said Zoellick. “But people in developing countries have much less cushion: no savings, no insurance, no unemployment benefits, and often no food. During the East Asia crisis, there was a 22 percent increase in anemia among pregnant women in Thailand, while school enrolments fell in Indonesia. This kind of reversal can affect a generation. We must not let it happen again.”
As part of measures to help protect the poor, the Bank’s Board of Executive Directors has given its approval to increase the Bank’s rapid financing facility for food to $2 billion. The approval comes less than a year after the Bank set up the facility, under the Global Food Crisis Response Program (GFRP). The US$1.2 ceiling has been almost reached with projects totaling US $1.18 billion in 36 countries.
“The continuing risky economic environment, combined with continuing volatility for food prices, means for poor people the food crisis is far from over,” said World Bank Group Managing Director Ngozi Okonjo-Iweala. “Many poor countries have not benefitted from some moderation of food price spikes in global markets. The decision to expand the facility will help ensure fast track measures are in place for continued rapid response to help countries.”
World Bank investments in social protection are expected to rise dramatically for 2009-2010 to $12 billion, up from $4 billion over the two years prior to the crisis. This lending includes rapid social response programs and conditional cash transfers, where families are granted money transfers in exchange for sending their children to school and for regular medical check-ups.
Zoellick said increasing investments in social protection programs have been found to be effective in both stimulating spending and protecting the poor at a relatively low cost, often less than one percent of a country’s gross domestic product (GDP). Successful programs such as Mexico’s Oportunidades, or Brazil’s Bolsa Familia, cost on the order of 0.4 percent of GDP, while Ethiopia’s largest safety net program, the Productive Safety Net, costs about 1.7 percent of GDP.
Earlier this month, the World Bank approved a US$1.5 billion loan to the Mexican Government to expand Oportunidades, a move aimed at assisting the Government to help the 25 million people that live in the five million most vulnerable households in the country.
The World Bank has set up a Vulnerability Financing Facility to channel funds to those hardest hit by the twin food and economic crises with separate windows for rapid social response and food security.
The Bank’s GFRP has provided immediate relief to countries hard hit by food prices. Projects implemented by the World Bank and partners in the United Nations system have supported social protection programs such as food-for-work schemes, providing supplementary rations and micronutrients for mothers and their children, and school feeding programs for the most vulnerable. For example, in Sierra Leone, 119 cash-for-work projects have been approved, providing 42,000 person-days of employment for more than 5,300 people. In Liberia, monthly school feeding has been provided to 60,000 children since October 2008.
With nearly US$750 million disbursed to date, the GFRP also provides short and medium term support for food production by supplying farmers with seeds and fertilizer, improving irrigation and livestock-related activities for small-scale farmers, and providing budget support for government policies, such as offsetting tariff reductions for food and other unexpected costs.
The Bank’s rapid social response finances immediate interventions targeted at vulnerable groups. It emphasizes sustaining national investments in health, education, and other social programs during the economic crisis while expanding services for example in maternal/infant health and nutrition, and school feeding programs; scaled up targeted safety net programs; investments in active labor markets, income support for unemployed people, job creation and training programs and other related work initiatives.
