WASHINGTON: 27 countries have sought emergency funds from the World Bank following the Iran war, which resulted in shock waves in energy supplies across the globe, as revealed in a confidential bank report obtained by Reuters. The unnamed countries have not been indicated in the bank paper, nor is there any specified fund amount. The World Bank declined to comment
Three of the 27 nations have already locked in new financial instruments since fighting broke out on February 28. The remaining 24 are still pushing through the approval process.
Iran War Triggers Global Supply Chain Collapse
The war drove fuel prices sharply higher, disrupted oil supplies and cut off fertilizer shipments to developing nations that desperately need them. Kenya and Iraq have both confirmed they are among those knocking on the World Bank’s door. Kenya wants help absorbing soaring fuel costs that are squeezing ordinary households. Iraq needs a financial lifeline after its oil revenues collapsed.
The 27 countries belong to a wider pool of 101 nations that hold pre-arranged access to World Bank emergency tools. Fifty-four of those nations signed onto the Rapid Response Option, which lets governments immediately draw up to 10 percent of their undisbursed World Bank financing no lengthy renegotiation required.
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World Bank Puts $100 Billion Crisis Toolkit on the Table
World Bank President Ajay Banga told reporters last month that the bank’s crisis toolkit could release between $20 billion and $25 billion through contingent financing, existing project balances and fast-disbursing instruments. Redirecting parts of the bank’s broader portfolio could push that number to $60 billion within six months, he said, with structural adjustments potentially lifting the total toward $100 billion.
IMF chief Kristalina Georgieva predicted that up to a dozen countries would request between $20 billion and $50 billion in near-term IMF support. But three sources with direct knowledge of the situation say very few formal requests have landed at the fund.
Countries are definitely in wait-and-see mode,” one source told Reuters, speaking on condition of anonymity.
Experts say governments are deliberately choosing the World Bank over the IMF. IMF loans usually come with austerity conditions such as cutting back on spending and raising taxes, meaning that governments are forced to make their citizens endure even more at a time when they can least afford it. In Kevin Gallagher’s view, applying additional conditions to the economy of a country that is currently experiencing unrest would be counterproductive.
Kenya illustrates the danger clearly. Street demonstrations ensued following a reduction in fuel subsidies by the government. Adding economic measures from the IMF could lead to disaster for an already volatile political climate. Unlike earlier World Bank instruments, these economic tools carry fewer risks and help struggling governments stabilize their economies more effectively.
Meanwhile, food prices keep climbing, currencies keep sliding and inflation keeps chewing through household savings across the Global South. The longer the remaining 24 countries wait to finalize their applications and the slower the World Bank moves to disburse the deeper the damage the Iran war will carve into the world’s most vulnerable economies.
