Date:07/01/2009 URL: http://www.thehindubusinessline.com/2009/01/07/stories/2009010751250500.htm

Back IFC global board okays crisis response for emerging markets

The IFC’s crisis response facilities consist of a doubling of the IFC Global Trade Finance Program to $3 billion from $1.5 billion.

Our Bureau

New Delhi, Jan. 6 The International Finance Corporation (IFC) is likely to firm up its India strategy for the coming year (2009-10) in the next three weeks. Indications are that the strategies would be discussed and devised in the context of the global financial turmoil and the impact on emerging markets such as India.

For the year July 2007-June 2008, IFC had committed $1 billion to the private sector in India. The India strategy will come close on the heels of the package of crisis response initiatives approved by the IFC’s global board in Washington on Monday, IFC sources said.

The IFC’s crisis response facilities, aimed at supporting the private sector in emerging markets hit by the global financial crisis, consist of a doubling of the IFC Global Trade Finance Program to $3 billion from $1.5 billion, a new $3 billion bank recapitalisation fund and an infrastructure crisis facility that is expected to mobilise at least $1.5 billion.

An IFC release said that it would double its existing global trade finance programme from $1.5 billion to $3 billion over a three-year period to meet large increase in demand for short-term trade finance. The expanded facility will benefit participating banks, including those in some of the world’s poorest countries.

Also, IFC will launch a global equity fund to recapitalise banks, as bank failures would further damage economic activity and worsen poverty in developing countries. IFC expects to invest $1 billion over three years and Japan has announced it ill invest $2 billion in the fund.

The IFC’s infrastructure crisis facility will bridge the gap in available financing for viable, privately funded infrastructure projects facing financial distress. IFC expects over three years to invest a maximum of $300 million.

IFC is also scaling up and refocusing its advisory services geared to financial institutions and governments, and reform of the financial infrastructure — banking for small and medium enterprises, leasing, microfinance, housing, investment policy and promotion, and business operation and regulation.