The shortfall in trade finance, which underpins a large share of the $13-14 trillion in global trade, is running at $100-300 billion, a senior World Bank official said on Thursday. The figures highlight the damage being done to trade and output by the financial crisis, as well as indicating that policymakers are uncertain about the scope of the problem.
Richard Newfarmer, World Bank representative to the United Nations and World Trade Organisation (WTO) in Geneva, told a seminar that the figure was derived from a recent International Monetary Fund (IMF) study that drew on a survey of 40 banks by the Bankers Association for Finance and Trade (BAFT).
The study found that trade financing constraints were affecting 6-10 percent of developing country trade, he said. "Thats a big number. If you extrapolate from that you end up with a financing gap on the order of $100-300 billion for trade finance alone," he said. Trade finance will feature on the agenda of the summit of G20 leading nations on April 2. Among measures, the World Banks private-sector arm, the International Financial Corp, is planning to create a $10 billion "global trade liquidity pool" with governments and commercial banks that could generate $40-50 billion in annual trade finance funding.
On Wednesday a senior trade source, speaking after a meeting of experts on trade finance hosted by the WTO, estimated the trade finance shortfall at about $100 billion. WTO Director-General Pascal Lamy said after a previous meeting of experts on trade finance in November that the shortfall was about $25 billion.
Many countries have reported double-digit drops in exports over the past few months as the recession takes hold, and global trade volumes are forecast to contract this year for the first time since 1982.
The World Bank estimates that 10-15 percent of the decline in trade is due to problems with trade finance, Jean-Christophe Maur, a senior economist at the World Bank Institute, told Reuters after the seminar. The WTO is due to issue a forecast for trade next week. In January the IMF forecast trade would contract this year by 2.8 percent, but a senior trade source said last week the IMF would revise that figure to 5 percent or more before the G20 summit.