News: World Bank and Structural Readjustments

Classes have once again started for me, and the topic of IMF/WB loans came up last week. Nevermind how class actually went though. Anyway, with all the focus right now being on Haiti there is really not much news coming out about E.Europe/Central Asia. There was some information on loans that was posted a couple of days ago:

Reflecting pre-existing vulnerabilities in many countries (in particular current account deficits arising from large private sector savings-investment imbalances), developing Europe and Central Asia was hardest hit by the crisis, with GDP falling by an estimated 6.2 percent in 2009. Although GDP is projected to rise by 2.7 percent in 2010 and 3.6 percent in 2011, growth rates in most economies will remain below potential and unemployment and bank restructuring will continue to be pervasive. Much higher non-performing loans, higher interest rates and weak international capital flows will remain key challenges in the near term. Compared to the pre-crisis period, high non-performing loans, weak public finances and low international capital flows are likely to dampen investment growth in many countries. Moreover, significant downside risks persist, including the possibility of a double-dip recession or increased financial difficulties for banks in the region. Despite better international financing conditions and domestic adjustments, the region’s external financing needs are expected to exceed inflows by as much as $54 billion in 2010.

source

Turmoil at Twenty: Part 3

Part 3 of the series culling through the Turmoil at Twenty bank report. Here are the main points, well mostly. This is dense, there's a lot of graphs and numbers, and I probably should have had another cup of coffee before reading this.

How Much Adjustment? How Much Financing?
Two main issues in financially less stable ECA nations: external debt is maturing and new money to finance current deficits may not happen.

- High inflation and other adjustments are happening
- Decrease in imports from western Europe and the US coupled with credit tightening are increasing the problem
- Sharp decline in the price of oil impacting Russia and Kazakhstan
- This chapter compares the current crisis with the one in the mid to late 90’s when there was a considerable about of finance and adjusting going on.
- Middle and lower income nations have less budget fluctuation due to financing being for direct official sources and not FDI, however poverty is increasing and other humanitarian issues are becoming more prevalent.
- There’s a lot of info about bank and parent-host relationships between donating countries and recipient countries. As always, not all type of aid is considered equal.

Projects: Armenia Road Rehabilitation

Looking back on the World Bank transportation infrastructure improvements for 2009, the most recently approved project is actually additional funding for the Armenia: Lifeline Roads Improvement Project which is funded out of the IRBD. $36.6 million USD with a standard 25 year loan (with a 10 year grace period) to rehab 140 km of roads in rural Armenia. Here's the reason for the additional funds (available in the project description):

This project paper concerns to provide an additional loan to the Republic of Armenia for the Lifeline Roads Improvement Project (LRIP). The additional loan will finance the scaling up of the project's activities through rehabilitating an additional 140 kilometers of the lifeline road network. This additional loan will also help mitigate the impact of the financial crisis by creating temporary jobs in road construction. This additional financing (AF) will also finance the design of project roads, supervision of works, capacity development in pavement design and road safety, project operating costs, and financial and technical audits. The project development objective (PDO) will remain the same as in the original project. The results framework and the monitoring indicators have been revised to reflect the increased scope of the project. The implementation arrangements remain the same as in the original project. There will be no co-financing from other donors. The closing date is being extended by one year, from December 31, 2010 to December 31, 2011.

The additional funds were approved of August of this year, but no new project proposals for transportation have happened in the second half of the year. Looks like the World Bank is setting the stage with government reform programs/money in Georgia and Armenia and adding additional funding to infrastructure projects in Azerbaijan. Hopefully a more exciting project will come out of the World Bank next year, otherwise it looks like private developers are having all the fun.