Hard-Hit Nations Targeted for Aid
WORLD BANK-IMF MEETING
THE World Bank and International Monetary Fund (IMF) feel something like the parent that gets a ``need money fast'' call from its offspring at college: some of its member nations, hurt economically by the gulf crisis, want aid now - not years in the future. Such emergency assistance, rather than long-term development aid, is high on the agenda for the world's finance ministers and central bank governors who are gathered here for the joint annual meetings of the two multilateral institutions. Preliminary meetings of the week-long conference begin today.
A falloff in worker remittances, lower trade revenues, and higher oil prices have devastated the economies of ``front-line states'' such as Jordan, Egypt, and Turkey. For others, particularly debt-distressed oil-importing countries, the crisis is jeopardizing hard-won progress of reforms spurred by the IMF.
Various ways are being explored to speed assistance to these affected countries, says a Bank official. While the average World Bank loan takes six to nine years to disburse, the official says that the bank is looking at ways to supplement financing for projects now under way. This would be done by adding to original commitments or expanding projects.
World Bank loan commitments for Europe, the Middle East, and North Africa during the 1991 fiscal year, which began July 1, will total roughly $5 billion. Eastern Europe's portion of this may exceed $2.5 billion. The bank official says the numbers are likely to increase given the urgent needs of countries in the region.
Given the debt burdens of the affected states and their problems with creditworthiness, much of the emergency assistance would be concessional. ``They wouldn't be grants, but almost, with very low rates'' the bank official says.
Willi Wapenhans, World Bank vice president for Europe, the Middle East, and North Africa, says the duration of higher oil prices is uncertain, ``but we ought to be prepared for a sustained impact.''
World bank emergency assistance has a precedent, Mr. Wapenhans says, citing relief for Mexico and the Philippines after recent earthquakes.
``The most severely impacted country is Jordan. It stands to lose as much as one quarter of its gross domestic product. Egypt might suffer a reduction of GDP close to 5 percent,'' Wapenhans says.
For both Jordan and Egypt, the largest single source of foreign exchange has been remittances from workers in Iraq, Saudi Arabia, Kuwait, and other parts of the Persian Gulf. Returning workers not only dramatically reduce these countries' income, but also cause domestic strain.
Reviewing the performance of Middle Eastern economies during the fiscal year that ended June 30, Wapenhans says ``it was a lackluster year, which makes the response to the crisis even more difficult and ... more pressing.''
East Europe's needs
Of all the East European countries, Czechoslovakia may suffer the most adverse effects of higher oil prices, say World Bank and IMF officials. The country has relied on Soviet-subsidized energy supplies traded on a barter basis. Moscow has interrupted deliveries during the past year, and in the future will demand hard currency for its energy exports.
Czechoslovakia will be ratified as a new member of the IMF and the World Bank this week. Wapenhans says that even without the oil crunch, it has ``a very clear massive need in industrial restructuring, in the environment.''
The World Bank is trying to mobilize its own financial resources, as well as to serve as a funnel for bilateral sources. ``We've been approached by the Japanese and the Germans,'' concerning bilateral donations to affected countries, Wapenhans says.
Tokyo has announced a $4 billion package as its contribution to the Gulf crisis costs. Wapenhans says that $2 billion will go toward absorbing some of the military costs of holding Iraq at bay. The remaining $2 billion will go to Jordan, Egypt, Turkey, and possibly Morocco. Out of that amount, $600 million will be immediately disbursed for emergency food assistance to the front-line states. The remaining $1.4 billion ``will be left for the World Bank and the IMF to coordinate over a period of one to two years.''
Wapenhans adds, ``there is no highly refined mechanism of burden-sharing worked out yet. I doubt we will even reach this stage,'' he says, looking forward to the week of meetings.