World Bank President Ajay Banga said on Wednesday that countries affected by the Iran war should prepare for months of conflict-related disruptions, even if the current shaky ceasefire holds and the Strait of Hormuz is reopened.
“It will still take a few months for things to get back to where they were,” Banga told CNBC’s Karen Tso at the International Monetary Fund’s spring meetings, with the key oil-shipping route no longer closed amid Iranian threats and the US blockade.
“So we have to be prepared for a few months of instability for these countries,” he said.
Banga said the World Bank has created a “war chest” plan to provide different levels of funding to countries depending on how long the conflict lasts.
“Thanks to our crisis toolkit, our countries could get immediate access to about $20 to $25 billion, as early as tomorrow morning, without new approvals,” he said.
He said, if the war continues for the next five or six months, this figure could increase to $60 billion.
He said that if needed, the World Bank can raise 80 to 100 billion dollars in the next 15 months.
He said the bank had only “put $70 billion into action” during the COVID-19 pandemic. “So I’m putting together a kind of war chest of three steps and three steps to be able to accomplish this,” he said.
Banga also said he was advising World Bank clients affected by the war to focus first on curbing inflation.
“Make sure you get inflation under control before worrying about the growth side again,” Banga said. “You have to make sure it gets managed.”