A joint statement regarding this was issued by the World Trade Organization (WTO), International Finance Corporation (IFC), European Bank for Reconstruction and Development (EBRD), Asian Development Bank (ADB), African Development Bank Group (AfDB), Islamic Trade Finance Corporation (ITFC) and the InterAmerican Development Corporation (IDB Invest).
They committed to do more to support trade finance providers in the coming months, and urged other institutions to join their ongoing efforts to provide vital financing support for cross-border trade, the WTO said in a statement.
The seven agency heads said the COVID-19 pandemic was severely disrupting the provision of trade finance, which was already in short supply in developing countries and for smaller businesses.
Under normal financial circumstances, trade finance is low risk, which is reflected in its cost, but as economic conditions around the world deteriorate, banks have become increasingly risk-averse, it said, adding they are particularly skittish about financing cross-border transactions for fear of non-payment.
"The heads of the WTO and six multilateral development banks on July 1 issued a joint statement promising to address shortages in trade finance, so that financial market stresses arising from the COVID-19 crisis do not prevent otherwise-viable trade transactions, including for essential goods such as food, drugs and medical equipment," it said.
It also said that in many developing countries, trade finance shortages impede imports of essential food and medical goods as well as exports of key income-generating products.
Such shortages disproportionately weigh on the micro, small and medium-sized enterprises (MSMEs) that account for the bulk of employment, which means they have a particularly strong effect on the livelihoods of poor people, it added.
"The agency heads vowed to continue to assess market developments as needs evolve and...act within our respective mandates to reduce trade finance gaps that emerge during this crisis. They called on other players to join their efforts, with a view to boosting trade and driving a strong economic recovery," it added.
WTO Director-General Roberto Azevêdo said inadequate trade finance would make it harder for countries to import essential food and medical equipment in the short term.
"It would make it harder for trade to help drive the strong economic recovery the world will need once this health crisis starts to recede," he said.
India is a member of WTO since 1995. There are a total of 164 members in the Geneva-based body which deals with global export and import related issues. RR RVK