World Bank President Ajay Banga said on Wednesday that countries affected by the Iran war should prepare for months of conflict-related disruption even if the current fragile ceasefire continues and the Strait of Hormuz reopens.
Banga told CNBC’s Karen Tso at the International Monetary Fund’s Spring Meetings that even if the Iranian threat and U.S. blockade no longer cut off key oil shipping routes, “it will still take months for things to get back to normal.”
“We therefore need to prepare for some degree of instability for these countries for several months,” he said.
Banga said the World Bank was preparing a “war chest” plan that would provide different levels of funding to countries depending on the length of the conflict.
“Thanks to our crisis toolkit, our country will have immediate access to approximately $20 billion to $25 billion, literally tomorrow morning, without any new authorizations,” he said.
He said that amount could rise to $60 billion if the war continues for the next five to six months.
He said the World Bank could add $80 billion to $100 billion over the next 15 months if needed.
He noted that the bank has “only deployed $70 billion” during the coronavirus pandemic. “So I’m preparing a kind of war chest, divided into three types and three tiers, to be able to respond to this,” he said.
Banga also said he was advising World Bank clients affected by the war to focus first on reducing inflation.
“We should make sure we get inflation under control before we start worrying too much about falling back into growth concerns,” Banga said. “We need to make sure we manage this.”
