IFC ‘crisis facility’ launches with $2bn in commitments

The World Bank’s International Finance Corporation (IFC) has formally launched its Infrastructure Crisis Facility, raising approximately $2 billion in commitments en route toward a $10 billion fundraising target.

The facility, approved by the World Bank’s board last December, will provide a pool of debt, equity and advisory services funding intended to bridge the gap between necessary and available financing for infrastructure development in emerging markets such as Latin America, Africa and South Asia.

Up to 25 percent of total costs for viable, privately-funded or public-private partnership projects in such markets would be eligible to draw down on the facility’s resources.

At a signing ceremony in Washington DC over the weekend, Germany and France became founding members and first countries to participate in the facility, pledging commitments of €500 million ($660 million) and €1 billion ($1.3 billion), respectively.

Both countries’ commitments were made to the debt portion of the facility and will be used to co-finance projects that are facing distress because of the ongoing crisis, IFC spokesperson Zibu Sibanda told InfrastructureInvestor.

The facility will have a global mandate but will have a special focus on funding projects in Africa.

“Africa still has greatest need of all the different continents [for infrastructure],” Sibanda said.

Although the funding commitments from France and Germany are akin to a first close on a private equity fund, which usually enables the fund to start investing, the IFC’s crisis facility is not yet ready to deploy the capital.

“We are still working out the modalities of how projects are going to apply for financing,” Sibanda said.

In the meanwhile, the IFC is continuing its fundraising effort. Several Asian and Latin American countries have expressed interest in contributing to the facility, Sibanda said. The IFC has also agreed to provide $300 million to the equity portion of the facility and may provide up to $2 billion in loan co-financing.

The $10 billion would enable roughly $40 billion of projects due to the 25 percent cap on project commitments, Sibanda said.

Even $40 billion would fall well short of the needed spend. Preliminary research by IFC indicates that roughly $110 billion worth of new projects risk delay or postponement and about $70 billion worth of existing projects face financing or refinancing risk due to the effects of the credit crisis.

Longer term, emerging markets expect infrastructure financing needs of $21 trillion for 2008-2017, according to IFC estimates.