Switzerland to donate CHF 879M to banks to help fight poverty, COVID crisis

The multilateral development banks play a major role in managing crises and in combating extreme poverty.

Switzerland is to contribute CHF 879 million to the coffers of the International Development Association (IDA/World Bank) and of the African Development Fund (ADF) to help fight poverty, promote sustainable development and deal with the health, social and economic impacts of the COVID-19 crisis on the world’s poorest countries. Switzerland is also contributing CHF 115 million to the Multilateral Debt Relief Initiative (MDRI). These decisions were taken by the Federal Council on 27 May.

The COVID-19 crisis is threatening to jeopardise the progress made in reducing poverty and improving health and living standards made in recent decades in many developing countries. The multilateral development banks play a major role in managing crises and in combating extreme poverty. With their expertise and financial means, they are effective in addressing global challenges such as pandemics, financial crises and climate change. Switzerland’s support for multilateral action forms part of the process of implementing its International Cooperation Strategy (ICS).

Over the next three years, the IDA, the arm of the World Bank set up to support the world’s poorest countries, will invest USD 82 billion in their development. Its aim is to promote economic growth in these countries, to increase their resilience and to improve the economic and social outlook for the poorest inhabitants. The IDA will also focus on job creation and on improving prospects locally for people in unstable countries or those suffering conflict. Helping them to mitigate and adapt to climate change is another of its key aims. In particular, the IDA will use its funds to cushion the negative impacts of the COVID-19 pandemic, investing up to USD 50 billion over the next 15 months.

The ADF uses its funds of USD 7.6 billion to help, in particular, countries in unstable contexts, with a specific focus on the causes of irregular migration and refugee flows. The money goes towards improving general economic conditions, developing the private sector and promoting sustainable and inclusive growth. More than one-third of the funds will be used to stop the spread of the coronavirus and manage the COVID-19 crisis and its consequences.

Switzerland has decided to commit CHF 683 million to restock the IDA coffers and CHF 196 million for those of the ADF. This money will be paid out over nine to ten years. Switzerland is also committing a further CHF 115 million to the MDRI, continuing the support it began in 2005. As the name suggests, under this initiative loans to heavily indebted countries made by the IDA and the ADF are successively written off, provided these countries introduce certain reforms. CHF 733 million has been earmarked from the existing 2017­-20 framework budget to fund technical cooperation and from the aid fund for developing counties. The remainder (CHF 260 million) will be taken from the ensuing 2021-2024 International Cooperation Strategy development cooperation framework budget. As Parliament has not yet made its decision regarding the ICS, this part of the Swiss contribution has been pledged to the World Bank under the proviso that the strategy is approved by Parliament.

Switzerland is a long-standing member of the World Bank Group and of the African Development Bank, and through its presence on the institutions’ governing bodies actively influences their strategic orientation and programmes. The banks provide developing countries with restricted access to capital, low-interest loans, subsidies and technical aid. The development banks are among Switzerland’s priority multilateral organisations in the field of international cooperation.

(With Inputs from APO)