International Lenders Backing Countries Hit by Conflict Spillover

COLOMBO (News 1st); Seven Multilateral Development Banks (MDBs) have issued a joint statement pledging coordinated support to help countries address the wide-ranging economic impacts stemming from the ongoing conflict in the Middle East.

The institutions in a joint statement said they are responding to requests from countries and clients affected by disruptions to energy and fertilizer markets, as well as trade routes. These disruptions have triggered broader spillover effects, including rising inflation, food insecurity, job losses, and pressures on fiscal and external balances, along with tightened financing conditions.

The MDBs highlighted their unique capacity to combine financing, policy support, private sector instruments, and technical expertise at scale to help countries manage economic shocks, safeguard development progress, and build long-term resilience. They stated that assistance would be delivered in line with each institution’s mandate, strategy, and operational framework, with backing from their respective shareholders.

The response strategy focuses on providing immediate relief to vulnerable populations while maintaining essential services, alongside efforts to strengthen the structural foundations of sustainable and resilient economies.

Key areas of intervention include ensuring continued access to essential goods such as energy, food, and agricultural inputs for economies most exposed to shocks. This will involve expanding trade and supply chain financing and supporting diversification efforts.

The MDBs also plan to provide fast-disbursing budget support to governments facing increased fiscal pressures, enabling them to mitigate the impact of economic shocks on vulnerable populations while maintaining price stability through targeted assistance.

In addition, support will be extended to businesses, including micro, small, and medium enterprises, as well as utility companies and public sector entities, through the provision of working capital, liquidity, and advisory services to help them navigate market volatility and protect jobs.

The banks further committed to offering policy advice and technical assistance aimed at designing targeted and time-bound support measures for affected households and sectors. These efforts will seek to maintain efficient resource use, ensure medium-term fiscal sustainability, and support reforms to strengthen economic governance, job creation, and domestic resource mobilisation.

Investment will also be directed toward strengthening long-term resilience, including diversifying energy sources and improving connectivity.

The MDBs emphasised the importance of continuous monitoring of evolving risks, particularly in relation to food security, to ensure timely and coordinated responses.
They affirmed that their support would be adapted and scaled according to the needs of countries and clients, with close coordination among MDBs, governments, development partners, and the private sector to deliver timely, targeted, and fiscally sustainable interventions.

The joint statement was issued by the African Development Bank Group, Asian Development Bank, Council of Europe Development Bank, European Bank for Reconstruction and Development, European Investment Bank, Inter-American Development Bank Group, and the World Bank Group.