By Christopher Swann
Nov. 11 (Bloomberg) -- The World Bank will almost triple lending this year to help prevent a ``human crisis'' in developing countries as the turmoil in financial markets weakens economic growth in rich nations.
Lending to middle-income nations may reach $35 billion in the 12 months to June 30, compared with $13.5 billion last fiscal year, the Washington-based lender said in a statement today. The bank said it's prepared to commit as much as $100 billion in the next three years to meet demand for loans.
A credit crisis that's shrinking economies in the U.S., Europe and Asia threatens to cut government revenue from India to Mexico, reducing public spending on health care and education. World Bank President Robert Zoellick called on leaders from the Group of 20 countries meeting Nov. 15 in Washington to act together to stabilize markets.
``The response to this crisis must be global, coordinated, flexible and fast,'' Zoellick said in the statement. ``It is more critical than ever that the international community acts in a coordinated and supportive way.''
The World Bank also cut its forecast for growth in developing countries to 4.5 percent for 2009 compared with its previous projection in June of 6.4 percent, saying that financial turmoil, slower export growth and weaker commodity prices are hurting the outlook.
Growth in high-income countries will shrink 0.1 percent next year, compared with a 1.4 percent increase in 2008, the bank said in new forecasts released today. Global trade may decline next year for the first time since 1982, Zoellick said.
Private Markets
Middle-income countries such as China, India and Brazil grew less dependent on World Bank loans in recent years because of ready access to international capital markets. As private sources of financing dry up, many governments may come back to the lender to help pay for infrastructure projects, health care and education programs.
On a conference call, Zoellick said the bank has already received loan inquires from countries in Asia and Latin America.
The World Bank's main lending arm, the International Bank for Reconstruction and Development, uses its triple-A credit rating to borrow money in capital markets and pass on lower interest rates to poor nations.
The World Bank today said it plans to set up a recapitalization fund to help distressed banks in poor countries, the statement said. The International Finance Corp., the bank's private-sector lending arm, plans to invest $1 billion over three years and raise at least $2 billion from other investors, it said.
The World Bank said the IFC will double a trade financing program to $3 billion.
Global Poverty
The lender estimates that a 1 percent decline in developing country growth pushes an additional 20 million people into poverty. So far the surge in food and fuel prices in recent years has driven 100 million people into poverty, according to the World Bank.
``Many developing countries are moving into a danger zone,'' the bank said in a paper, released today, prepared for the G-20 meeting. ``Some developing countries will be hit much harder than the average.''
The World Bank also has a soft-loan arm, the International Development Association, which is supported by donations every three years from rich nations. IDA, which lends money to the 78 poorest countries, has $42 billion available to finance projects.
To contact the reporters on this story: Christopher Swann in Washington at cswann1@bloomberg.net;
Last Updated: November 11, 2008 11:01 EST
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