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IDB plans to increase lending this year
…Moreno predicts fewer jobs, more poverty
Inter-American Development Bank (IDB) President, Luis Alberto Moreno is predicting fewer jobs and more poverty in the Caribbean and Latin American this year, even as the bank has tasked a special commission with deciding how the Bank will increase its financing capabilities.
Luis Alberto Moreno
As a result of the global financial crisis, he said, the Bank is making a tremendous effort to increase its financing this year, and this could reach a record of US$18B.
Moreno said this money will be made up of $12 billion from the Bank’s ordinary capital and as much as $6 billion from its emergency liquidity fund.
The IDB created the emergency liquidity fund in October to provide financing for banks in the region so they can continue to provide loans to companies.
“We are committed to increase our financing to the region,” Moreno said in a Question and Answer discussion posted on the Bank’s website.
With the Annual Meeting of the Board of Governors of the Inter-American Development Bank, on March 27 through March 31, in Medellín, Colombia two weeks away and the world economy facing its biggest crisis in seven decades, Moreno discussed the crisis’ impact on Latin American and Caribbean economies and what countries can do to soften the blow.
The Bank is also holding discussions with its members on how to increase its financing capabilities in order to meet growing demand from member countries.
“We have created a special commission to look into this matter and this group will present their findings during our annual meeting.
“The region needs a stronger and bigger IDB to help address its long-term development goals.”
Moreno said the crisis is reducing the availability of credit to emerging market countries and reducing demand for commodities, which are the main source of exports from Latin America and the Caribbean.
“Our banking system, despite its resilience stemming from a sound regulatory framework, has also been exposed to the crisis because of the presence of international banks, which have been cutting lending to the region.
“As a result, economic growth in the region will be affected, meaning fewer jobs and more people are under threat of falling back into poverty,” he said.
Moreno said that if the crisis lasts just one year and economic growth in the region were 1.1 percent, which is the latest scenario forecast by the International Monetary Fund, as many as 2.8 million people could fall back into poverty in Latin America and the Caribbean in 2009.
The IDB President has advised that it is imperative that countries use the money wisely to ensure that their recent advances in the fight against poverty are not destroyed.
Latin America and the Caribbean over the last five years have done a tremendous job in improving the resilience of their economies and the quality of life of millions of people. About 48 million people in the region have been lifted above the poverty line since 2003.
“We need to ensure those gains are not lost. It is important, for example, to invest in social safety nets, particularly conditional cash transfer programmes, which ensure that children stay in schools and get proper health care,” he said.
Mr Moreno said the crisis has proved that financial institutions need to be flexible and adaptive to a continuously changing environment.
“Just one year ago, multilaterals were exploring new areas as countries progressively gained access to international credit.
“It is important to realize that developing countries will have a very limited capacity to perform counter-cyclical policies, as we are seeing in developed countries. Now, countries need again our help and we have to be agile in fulfilling their increasing demands.”
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