Of all the multilateral
development banks (MDBs), including the World Bank, the Islamic Development
Bank’s (IsDB’s) rapid response to the global coronavirus (Covid-19) pandemic
has been the most proactive and urgent.
In a space of four weeks, from
April 2020 into early May, IsDB President Dr Bandar Hajjar probably set a
record for the number of online meetings held with governors of the IsDB’s
Board of Directors (usually finance ministers) representing its member
countries. He spoke to many African government officials.
The meetings aimed at assessing
the immediate needs and challenges posed by Covid-19, especially in the health
and economic sectors, and the level of emergency financing packages disbursed.
The IsDB board approved an
initial $2.3bn Group Strategic Preparedness & Response Programme (SPRP) in
March 2020 to help combat the health and socio-economic impact of Covid-19 in
It comprised a combination of
soft loans, ordinary (market) resources, private sector finance, trade finance
and export/import credit and investment insurance. This is the single largest
round of aid financing from the organisation.
“Our Response Package of $2.3bn
adopts a holistic approach focusing on short, medium, and long-term needs. Of
this package, we have already committed $1.86bn to 27 member countries (at 21
May 2020),” said Dr Hajjar. He went on to add: “IsDB fully recognises the
limited ability and capacity of its member countries to cope with these adverse
impacts of Covid-19. Our IsDB Group teams are working tirelessly to provide
fast-tracked assistance under our SPRP, which is designed to help member
countries to recover from this pandemic.”
The programme, he explained,
adopts a holistic view guided by ‘the 3Rs’ – Respond, Restore, and Restart –
approach that covers the short, medium and long-term, and aims to accommodate
priorities beyond the immediate emergency response to the health sector.
The aim is to ultimately put the
countries back on the economic recovery track through restoring livelihoods,
building resilience and kick-starting growth.
“We are focusing on the core of
the problem – the health aspect,” Dr Hajjar said. “The economic repercussions,
albeit crucial, are only symptoms or consequences of the disease. In contrast,
the critical challenge that must be addressed is to create a vaccine for the
virus and to support health systems towards safeguarding lives.”
This opens up the possibilities
for local and international companies to provide medical supplies, equipment
and services, and IT innovations in healthcare management through contact
tracing apps, etc.
In terms of the source of
contributions to the programme, the IsDB contributed $1.52bn; the International
Islamic Trade Finance Corporation (ITFC) $300m; the Islamic Corporation for the
Development of the Private Sector (ICD) $250m; and the Islamic Corporation for
the Insurance of Investment and Export Credit (ICIEC) $150m. All of these have
extensive operations in Africa.
Dr Hajjar also had a virtual meeting with the heads of
Arab Coordination Group institutions including the Arab Bank for Economic
Development in Africa and the Arab Fund for Economic and Social Development.
This meeting resulted in the allocation of an additional $10bn to developing
countries to support their efforts to recover from the recession caused by the
Covid-19 outbreak and its repercussions.
The funds will be allocated through grants, soft loans,
technical support, general budget support, financing lines, trade finance,
investment insurance and private sector support.
experience put to use
The IsDB’s prompt response to
Covid-19 is the result of the valuable experience it gained while helping its
African member countries in their fight against HIV/AIDS, which decimated the
social and economic fabric of several parts of the continent. It has also run
polio and malaria vaccination programmes, and provided assistance with the
Ebola epidemic in West Africa.
“We must learn from the lessons
of the Ebola crisis,” says Dr Hajjar, “by resisting handing out unconditional
bailouts, rather than structuring them to restart a new economy – one that is
focused on a 4.0 framework of growth.
“That means building capacity
around the 4th generation of industrialisation that uses science and technology
to prevent global value chains’ disruption under such pandemics, while
maintaining zero environmental footprints.”
Another reason for its rapid
response could be that the overwhelming majority of member countries of the
IsDB are classified as Least Developed, especially in Sub-Saharan Africa and
Asia. The IsDB, since its establishment in 1975, has also gained much experience
since of the priorities and sensitivities in aiding such economies – including
targeting primary healthcare, education, transport infrastructure, sanitation,
trade and promoting the private sector, especially SMEs.
The IsDB has in addition proven
to be less encumbered by the politics of its membership, unlike the World
Bank/IMF, instead concentrating on achieving the Sustainable Development Goals
of the UN’s Agenda 2030 in its own operations.
The bank is well-resourced, with
the second-largest subscribed capital of any MDB at $70bn and operating assets
of more than $16bn, with access to further callable capital. The IsDB raised
$2bn through a sukuk issuance in March 2020 at the onset of Covid-19, its
single largest offering to date.
Of the IsDB’s top five equity
subscribers, Libya is the second-largest after Saudi Arabia, with $4.2bn, and
Nigeria the fourth-largest with $3.9bn.
In four rounds of virtual
meetings, the IsDB allocated an initial total of $970m to 16 African member
countries of which the largest recipients are Tunisia, Senegal and Egypt. The
total allocations agreed are $279m to Tunisia, $162m to Senegal, $126m to
Egypt, $28.3m to Mozambique, $62.5m to Libya, $11m to Burkina Faso, $20m to
Benin, $15m to Guinea-Bissau, $20.2m to Uganda, $22.5m to Mali, $46.2m to Côte
d’Ivoire, $25m to Sierra Leone, $20m to Chad, $35m to Sudan, $5m to Djibouti
and $33m to Mauritania.
Dr Hajjar also had virtual
meetings with representatives of Nigeria, Algeria, Morocco, Cameroon and the
Republic of Guinea to finalise similar emergency financing packages.
The IsDB estimates that global
GDP growth would fall by 0.5%-1.5% as a result of the crisis, and according to
the UN Conference on Trade and Development (UNCTAD) estimates there will be a
loss to the global economy of $1-2trn in 2020. The International Labour
Organisation (ILO) also estimates a loss of 25m jobs.