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The World Bank Confronts Crisis in a Globalized World

World_crisis The World BankOn April 5, 2016, the World Bank Group’s President Jim Yong Kim gave a speech titled “Development in a Time of Crisis” addressing the need for world powers to step in and address the obstacles that keep developing economies from flourishing.

Kim began his speech addressing the Syrian refugee crisis that has caused political polarization in a lot of developed countries.

He insists that the only way to combat the risk of future refugee crises is ameliorating poverty in displaced nations. “If fragile states still have 47 percent of their people living on less than two euros (about $2.27) a day by 2030, while the developed world prospers, the flow of migrants will not stop,” Kim noted.

In the speech, the World Bank President mentions Europe and Germany specifically lauding them for their efforts to settle the displaced Syrians. Part of the strategy to counter the risk of further displacement is increasing the amount of foreign aid that gets circulated to the developing economies.

Earlier this year, a report from the Organization for Economic Cooperation and Development recorded a 13 percent increase in the amount of Foreign Direct Aid circulated.

Expanding this kind of aid will lead to the poverty relief that can reduce the size of migratory crises. With this in mind, Kim began a discussion on how the World Bank can best mitigate these problems. In particular, he made reference to a recent loan to the country of Jordan.

The “groundbreaking” loan seeks to reward the Middle Eastern country for their efforts in easing the migratory crisis in neighboring Syria.

The loan, accepted in late March 2016, will provide $100 million to support the Jordanian education system as refugees enter the country. While funds provided to middle-income nations like Jordan typically come with a particular interest rate, this   concessionary loan will be provided with a longer payback period and less interest.

These types of new lending schemes are part of a New Financing Initiative which is expected to roll out programs worth $20 billion over 5 years.

The Jordanian loan and the financing initiative behind it led Kim to discuss three of the broader changes in the objectives of the World Bank:

  • “First, addressing the challenge of global threats that cross boundaries and regions will become ever more central to achieving our mission.” Kim asserts this as necessary in a globalized world where problems can quickly spread across the world.
  • “Second, we must focus much more effectively on managing risk and uncertainty.” Protecting those rising out of poverty from falling back prevents the damage caused by sudden crises.
  • “The third major change for us is that we must do much more to address the deep pockets of poverty and rising inequality in countries at every income level.”

The top World Bank official closed the speech by acknowledging the threat of global pandemic. In fact, Kim cites studies saying diseases like Ebola and the Zika virus could “lead to tens of millions of deaths and a loss of as much as five percent of global GDP – or roughly $4 trillion.”

Ebola and Zika outbreaks over the past two years have shown the health risks that are prevalent in an interconnected world. The CDC has reported transmission of the Zika virus in over 35 nations and the Ebola outbreak caused over 11,000 deaths across various African countries.

In response, the World Bank plans to design and fund the Pandemic Emergency Financing which hopes to create “creating a response system that will cost millions of dollars per year that could save hundreds of thousands, if not millions, of lives – and save billions, if not trillions, of dollars.”

These issues are just a few that Kim hopes that the World Bank can address in the near future. He reminds the world that fighting poverty and global issues is a careful process focused on “one region, one country and one person at a time.”

Jacob Hess

Photo: Flickr