OREANDA-NEWS. January 11, 2010. IFC, a member of the World Bank Group, and Sida today signed an agreement for Sweden to provide up to USD 125 million (up to 1.2 billion Swedish krona equivalent) to expand the availability of trade finance for the developing economies of Central and Eastern Europe, where business has contracted because of the global financial crisis.

The agreement signed by IFC and Sida, the Swedish International Development Cooperation Agency, will provide unfunded guarantees to global and regional banks that finance trade in emerging markets in Central and Eastern Europe, including Albania, Belarus, Bosnia and Herzegovina, Georgia, Kosovo, Macedonia, Moldova, Serbia, Turkey, and Ukraine.

This is the first facility within phase two of the IFC-led Global Trade Liquidity Program, a coordinated effort among government, international financial institutions, and development agencies to support trade finance in the wake of the drop in liquidity due to the global financial crisis. Over the last six months, the program has disbursed more than USD 900 million to support USD 2.2 billion in trade transactions in emerging markets.  

The unfunded guarantees provided through the facility will encourage banks to finance trade by helping mitigate the credit risk of re-entering or expanding into emerging markets. IFC plans to match Sida’s contribution and manage the facility.

According to a recent report by the International Monetary Fund and the Bankers’ Association for Finance and Trade, the overall value in trade finance business dropped the sharpest in Central and Eastern Europe, when comparing January 2009 with October 2008.

“This facility will go a long way to strengthen businesses in Central and Eastern Europe, one of the regions hit hardest by the global economic crisis,” said Lars Thunell, IFC Executive Vice President and CEO. “We are grateful for Sweden’s timely support, and look forward to other institutions and governments joining us to revitalize trade in the region.”

Anders Nordstrцm, Sida’s Director General, said, “I am proud that Sweden is at the forefront when it comes to new thinking and the development of new instruments to assist developing countries, which have been made more vulnerable by the financial crisis.”

IFC is the only international financial institution focused exclusively on the private sector, the engine of sustainable development in emerging markets. Along with IBRD, it is currently seeking a capital increase to strengthen its ability to create opportunity for the poor in developing countries—including by helping banks extend more trade finance to enterprises in emerging markets.