Countering the Crisis:
Trade/A Foundation of Recovery

Maize farmers in Malawi, cement firms in Nigeria, and metals exporters in Mauritius all have something in common.

Like many more companies across Africa and the rest of the developing world, IFC and its partners can boost them with new finance products that help counter the effects of the global financial crisis on one of the key drivers of development: trade.

“History tells us that no poor country has ever become wealthy without trade,” says World Trade Organization Director Pascal Lamy. He lists Singapore, South Korea, Chile, China, and Malaysia among the developing country success stories whose progress stemmed in part from their open trade policies. Ongoing access to trade finance was also critical.

But with demand shrinking and banks cutting back, global trade has slumped by 10 percent this year, eroding economies and impeding development. IFC is responding with a three-part package—the Global Trade Liquidity Program (GTLP), the Global Trade Finance Program, and an Export Credit Agency initiative—that together will support significant amounts of trade during the crisis.

The GTLP brings together governments, development finance institutions, and leading commercial banks. For every 40 cents IFC and public investors put up, commercial bank partners will add 60 cents. A $400 million line of credit South Africa’s Standard Bank received under the program supports trade in Africa. Standard Bank’s Craig Polkinghorne says it “will go a long way to stimulating economic growth in the region, especially since many banks have retreated from Africa during the financial crisis.”

The $400 million will largely be distributed in sums between $10 million and $20 million to businesses in energy, mining, commodities, capital goods, and other sectors in many African countries. IFC provided $100 million, mobilizing the rest from the African Development Bank, Commonwealth Development Corporation, and Japanese Bank for International Cooperation.