Supply Shocks Will Linger Even if Conflict Ends, Says World Bank

COLOMBO (News 1st); World Bank Group President Ajay Banga has outlined a phased financial response plan aimed at helping countries manage the economic fallout from prolonged global disruptions, warning that the effects of conflict and supply-chain damage are likely to last longer than many anticipate.

Speaking on the World Bank’s response approach, Banga said the first priority is the rapid availability of financing. He explained that through the World Bank’s crisis response toolkit and clauses embedded in certain existing projects, finance ministers could potentially access between US$20 billion and US$25 billion almost immediately. He described this as “real money” that could be mobilised quickly, noting that countries are still assessing what they need and how much support will ultimately be required.

Banga cautioned, however, that this funding is not grant money and that countries must be mindful of their fiscal constraints when drawing on these resources. He acknowledged that governments around the world are already facing significant fiscal challenges.

If the crisis caused by the middle east conflic continues for six months or more, Banga said the World Bank’s next step would be to repurpose existing projects, redirecting them toward areas that would be most helpful under prolonged strain. By doing so, the Bank estimates it could mobilise a total of US$50 billion to US$60 billion from its 2025 programme, representing an additional US$30 billion to US$40 billion beyond what was initially planned.

Should conditions deteriorate further and extend beyond that timeframe, Banga said the World Bank would need to examine its balance sheet and available headroom to determine how much more support could be provided. Over a period of approximately 15 months, he said the Bank believes it could reach a total response capacity of about US$80 billion.

Banga said the goal is to build a toolkit with a tiered response capacity, allowing the World Bank to scale its support depending on how long and how severely the crisis continues. While acknowledging that global institutions cannot control the immediate impact of conflicts, he stressed that they can control how they respond.

He said the focus must be on short-term measures to reduce pain and manage difficult conditions, while also recognising that the disruption should not be viewed as a brief episode.

Even if fighting were to stop immediately, Banga warned that it would take time for global supply systems to stabilise, particularly where energy infrastructure has been affected.