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Covid response: External lenders commit $6.5 billion, five times the Budget estimate

Much of this funding is being frontloaded for disbursal in the current year as an emergency response to the impact of the pandemic; some of the loan will likely come in 2021-22, government sources said.

Written by George Mathew , Sunny Verma | Mumbai, New Delhi | Updated: August 31, 2020 9:49:45 am
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Multilateral agencies such as World Bank and Asian Development Bank (ADB) have committed $6.5 billion (around Rs 48,000 crore) to India to fight the novel coronavirus since April — this is more than five times the $1.29 billion (Rs 9,558 crore) that the government had estimated from these agencies this year in the Union Budget, which was presented a month before the pandemic began to spread rapidly in the country.

Much of this funding is being frontloaded for disbursal in the current year as an emergency response to the impact of the pandemic; some of the loan will likely come in 2021-22, government sources said. The biggest chunk of the funding is from the World Bank, which has extended $2.75 billion to India as part of a Covid relief package.

The sources said the government expects net receipts to increase further as multilateral agencies step up funding to build health facilities and related infrastructure. The Finance Ministry too, has been in favour of higher development- and infrastructure-funding from multilateral and bilateral sources.

On April 2, the World Bank approved a fast-track $1-billion ‘India COVID-19 Emergency Response and Health Systems Preparedness Project’ to help the country prevent, detect, and respond to the virus, and strengthen public health preparedness. This is the biggest ever health sector support from the Bank to India.

Then, on May 14, the Bank approved another $1-billion loan to support Covid-19 relief measures and financial assistance for the poorest and most vulnerable communities. An immediate allocation of $750 million will be made for the fiscal year 2020, and the next tranche of $250 million for 2021, the Bank said.

The first phase of the operation will be implemented countrywide through the Pradhan Mantri Garib Kalyan Yojana (PMGKY). It will immediately help scale up cash transfers and food benefits, using a core set of pre-existing national platforms and programmes such as the Public Distribution System (PDS) and Direct Benefit Transfers (DBT).

On July 1, the Bank said it would provide $750 million budget support to 15 crore micro, small, and medium enterprises (MSMEs) to increase liquidity access for viable small businesses impacted by Covid-19. The $750 million loan from the International Bank for Reconstruction and Development (IBRD), the lending arm of the World Bank Group, will mature in 19 years, including a five-year grace period.

In the Budget presented in February, the Finance Ministry estimated net receipts from multilateral agencies for 2020-21 at Rs 9,558 crore (around $1.29 billion), lower than the Rs 12,863 crore received in 2019-20. Net receipts refer to total loan receipts during a year minus repayments during that year. The Budget data pertains to funding received from agencies including IBRD, International Development Association, International Fund for Agricultural Development, ADB, Eastern European Community (SAC), Organisation of the Petroleum Exporting Countries (OPEC), New Development Bank, and Asian Infrastructure Investment Bank (AIIB).

On April 28, the ADB approved a $1.5-billion ‘COVID-19 Active Response and Expenditure Support (CARES) Program’ to support India’s immediate pandemic response efforts, including disease containment and prevention, as well as social protection measures for the poor and economically vulnerable, particularly women and disadvantaged groups.

The CARES programme is funded through the Covid-19 Pandemic Response Option (CPRO) under the ADB’s Countercyclical Support Facility. CPRO was established as part of ADB’s $20-billion expanded assistance for developing the pandemic response of member countries, which was announced on April 13, ADB said.

On June 17, China-backed AIIB approved a $750-million loan to India to assist the government’s response to the adverse impacts of the pandemic on poor and vulnerable households. The budgetary support, which is co-financed with the ADB, will go towards bolstering economic aid for businesses, including for the informal sector, expanding social safety nets for the needy, and strengthening the country’s health care systems.

On May 8, the AIIB board of directors approved a loan of $500 million to support India’s efforts to prevent, detect and respond to the Covid-19 threat by strengthening preparedness of the national health system. The project is funded by AIIB’s Covid-19 Crisis Recovery Facility, created to adapt to urgent financing needs of the Bank’s members.

On April 30, the New Development Bank set up by the BRICS countries, approved a single tranche of $1 billion to India under its ‘Emergency Assistance Program in Combating Covid-19’. The programme, which will run until March 31, 2021, will be implemented by the Department of Economic Affairs, Ministry of Finance.

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