The US Department of Energy announced, on Saturday evening, that it had authorized an emergency exchange of up to 4 million barrels of strategic reserve of crude oil. To address supply disruptions resulting from Hurricane Isaias.
US Energy Secretary Chris Wright said in a statement: “The Department of Energy is moving quickly, through this emergency exchange, to help maintain refining operations, reduce fuel supply disruptions and ensure that American families and businesses continue to have access to affordable, reliable, and safe energy.”
Hurricane Isaias caused a shortage in the local supply in the US states, as a result of some precautionary measures, in addition to a shortage in the global supply of diesel, which led to a rise in the price of a gallon in America to more than $6.
World Bank President Ajay Banga said that the bank is in talks with between 30 and 40 countries about providing assistance to confront energy shocks and rising prices resulting from the war in the Middle East, warning that pressures on developing economies may increase in the coming months.
Banga explained, in an interview with Reuters before the start of the annual meetings of the International Monetary Fund and World Bank in Bangkok, that the global economy has shown a degree of flexibility, supported by large investments in artificial intelligence and adjustment in oil markets in terms of supply and demand. This contributed to limiting countries’ recourse to the emergency financing window of $25 billion, which the bank made available when the war broke out in late February.
But he pointed out that the sharp rise in diesel and fertilizer prices, in addition to the risks associated with the “El Niño” climate phenomenon, increases the challenges facing developing countries, especially in light of the high borrowing costs and the depletion of government financial resources due to the repercussions of the “Covid-19” pandemic and the wave of inflation that followed the Russian invasion of Ukraine.
Banga said that more countries may resort to available financing in the coming months, noting that the bank is ready to provide between 50 and 60 billion dollars through the initial financing window, in addition to redirecting resources from previously approved projects. He added that the amount of available financing may rise to $100 billion if conditions deteriorate, a level that exceeds $70 billion that the bank disbursed during the “Covid-19” pandemic.
According to World Bank estimates, the obligations owed by developing countries to external creditors will amount to about $400 billion in 2026, and interest payments alone represent a third of this amount, which increases pressure on the budgets of these countries and their ability to finance their development needs.
Investment flows do not arrive evenly
In parallel with efforts to respond to the crisis, the World Bank announced last month that it had succeeded in attracting $112 billion in private capital during the year ending in June, compared to $69 billion in the previous year, and more than three times the level recorded in 2022.
Banga said that these flows came in addition to $123 billion that the bank invested from its own resources during the same period, bringing the total financing to $235 billion, at a time when Western countries sharply reduced their bilateral development aid.
However, the increase in private financing was more concentrated in middle-income economies, as upper-tier countries, such as Argentina and India, attracted about $50 billion, while lower-tier countries, including Bangladesh and Angola, received $37 billion. In contrast, flows to low-income countries did not exceed about $3 billion.
Banga said that enhancing capital flows to smaller economies still faces challenges, pointing to new initiatives that the bank intends to announce during the current meetings to expand access to private financing for micro, small and medium enterprises.
He added that the bank expects private capital flows to continue to grow in the coming years, supported by expanding political investment risk guarantees, increasing financing in local currencies, and continuing regulatory reforms that facilitate the entry of foreign investors.
Debt swaps for development finance
Regarding the debt file, Banga said that the World Bank and the IMF are working together to address the high levels of debt in developing countries, including helping governments enhance domestic revenue collection.
He pointed out that the bank has already launched debt-for-development swap operations in Angola and Côte d'Ivoire, in addition to a guarantee based on a financing portfolio for Argentina, and is working on more than 12 additional projects in this field.
He explained that the bank has 14 to 15 projects in preparation, aiming to help countries replace new, less expensive debts with old, more expensive debts thanks to the bank’s guarantees, while directing the resulting savings to education, health care, water, and nature protection programs.
These moves come at a time when developing countries face simultaneous pressures from rising energy prices and borrowing costs, while debt burdens limit their ability to finance the services and investments necessary to support growth.
