INTERNATIONAL TRADE ADDS SUPPORT AMIDST COVID-19 CRISIS
In order to face the economic impact of the new coronavirus, COVID-19 as it has been officially called, the World Bank and the International Finance Corporation committed to providing a response to businesses in an expeditious, flexible and tailored manner.
A total of $14 billion was made available in the World Bank Group’s fast-track financing. First of all, one might think that this is only support for the medical and pharmaceutical industries, so that they can deal with the emergency of the spread of the new virus, but this goes beyond that. This new funding also includes international trade.
At Credit Report we know that this COVID-19 pandemic raises many concerns in the business world. On one side, there is growing concern among businesses about disruptions in supply chains and also about the constraints that some companies in various sectors will face in several weeks’ time when they are unable to meet their trade commitments.
The expansion of the International Finance Corporation’s (IFC) fast-track fund is good news for the trade sector. This timely action can help to add to peace of mind in the midst of uncertainty. Here’s why.
How much money is available to commercial businesses?
The IFC, a member of the World Bank Group and the direct provider of trade finance, increased the fund by $2 billion. In early March, the IFC had only made $6 billion available and now this has risen to $8 billion.
For the commercial world, in particular, $4 billion is available. This money is arranged equally between the Global Trade Finance Program and the Global Trade Liquidity Program.
How do companies benefit from this funding?
Exporting and importing companies, especially small and medium-sized ones, will be able to benefit from new trade credits. The financial institutions will be in charge of granting these new loans and the focus will be, above all, on the companies involved in the supply chains.
In the specific case of companies in emerging markets, such as South and Central America, they will also benefit from the Global Trade Liquidity Program, which injects funds into their local banks so that they have a back-up and continue with their financing operations. Banco Itaú Paraguay, for example, is one of the participants in this specific program.
What are the results of the Global Trade Liquidity Program?
This specific fund, which will now have an extra $2 billion in its package of action against COVID-19, has extensive experience.
More than 400 financial institutions in 69 countries around the world have received support. This represents a performance that adds up to nearly 24,000 commercial transactions and a volume of 53 billion dollars in commercial exchange.
Is there any first country benefited amidst COVID-19?
The first case of a person infected with this new virus in Vietnam appeared at the end of January. Since then, the agricultural and manufacturing sectors have faced disruptions in their supply chains.
In late February, Vietnam became one of the first countries to benefit from an expansion of its local trade finance fund. A group of four local banks raised their trade finance limit to $294 million, with a focus on supporting small and medium-size enterprises.
Is all the aid financial?
IFC not only has its own financial funds but also a network of partnerships to mobilize resources for various projects. The agency also provides advice on overcoming critical limitations in infrastructure, labor skills, or the regulatory environment.
Is there any experience with commercial financing in previous cases?
The Covid-19 pandemic is undoubtedly unprecedented. There is no precedent for such a widespread and extensive commercial impact around the globe.
However, the IFC was active during the Ebola outbreak that also affected the trade of the African countries of Liberia, Sierra Leone, and Guinea between 2014 and 2015.
At that time, 23,000 people were infected and another 9,000 died, while the World Bank estimated the economic impact at about $2 billion. IFC’s action was key to helping West African companies restore food and medicine supply chains.
Now international trade faces several serious constraints in the face of the COVID-19 emergency, but early responses are also being organized to mitigate its effects. Now is the time to assess in detail the scenarios to come and at Credit Report we are ready to offer you our 55 years’ experience to make your company one of the first to understand the picture, so you can act quickly and flexibly.