By Jackie Horne
The World Bank is creating new financial instruments to help countries handle refugee crises, but they are unlikely to be ready in time to help Bangladesh, which formally asked the World Bank for support last night to deal with the tide of Rohingya refugees from neighbouring Myanmar.
Finance minister Abul Maal Abdul Muhith put in the country’s request yesterday after arriving in Washington DC for the annual World Bank/IMF meetings.
Martin Rama, the bank’s chief economist for South Asia, told GlobalMarkets the supranational was adopting a twin-track approach to help the country.
“We are considering whether new instruments can be used and there has been no decision yet,” he said. “There has been a lot of thinking on the subject and the group is working on it, but the Bangladesh response will most probably involve existing instruments.”
The World Bank created its own catastrophe bonds in 2014 to transfer risks relating to natural disasters from developing countries to the capital markets. Since then, there have been discussions about refugee bonds, which would help get money quickly to countries in need.
However, Bangladesh has no track record in the international bond markets. It has always shied away in favour of cheaper concessional finance and remains proud of a low debt to GDP ratio below 15% and unblemished repayment history.
In this instance, it is likely to apply for funding under its core International Development Association (IDA) programme and the World Bank’s new IDA18 window.
This window was created in 2016 to provide a dedicated source of funding for host countries struggling to meet the needs of both refugees and their own local communities. The $2bn programme has a $400m single country limit.
Rama said Bangladesh faced major challenges coping with the estimated 500,000 Rohingya Muslims who have fled across the border since late August.
“The first thing to note is Bangladesh’s generosity in taking all these refugees,” he said. “Trying to take into account the wellbeing of the refugees and the local population is creating enormous pressures.”
Rama said the World Bank had been preparing for Bangladesh’s request for some time and intended to be “very active”. Money is likely to be released within a few weeks to a few months and could include expanding access to health, education, water, sanitation and roads.
However, he said the bank had not yet come up with a forecast for the cost of the crisis. Local economist Ashikur Rahman from the Policy Research Institute has put the figure at up to $1bn per year.